Scenario: With her available resources, Wendy can produce 20 greeting cards or 10 earrings. Sarah, with the resources she has, can produce 5 greeting cards or 15 earrings.
-Refer to the scenario above.What is Wendy's opportunity cost of producing 1 greeting card?

Question

Quizplus · Accepted Answer

Wendy's opportunity cost of producing 1 greeting card is the number of earrings she has to give up to produce that 1 card. To produce 1 greeting card, Wendy must give up producing 0.5 earrings (20 cards/10 earrings). Therefore, the best choice would be to have Wendy produce greeting cards and Sarah produce earrings since Sarah's opportunity cost of producing 1 earring is to give up producing only 0.33 greeting cards (5 cards/15 earrings).

Scenario: with Her Available Resources, Wendy Can Produce 20 Greeting