A home entertainment shop sells CDs and DVDs. The production possibilities curve shown below gives the maximum combinations of these two goods that can be inventoried in the store.

-On the basis of the production possibilities curve, what is the opportunity cost of increasing the stock of CDs from 1,500 to 2,750?
A) 1,200 DVDs.
B) 1,600 DVDs.
C) 2,250 DVDs.
D) Impossible to determine from this information.

Question

A home entertainment shop sells CDs and DVDs. The production possibilities curve shown below gives the maximum combinations of these two goods that can be inventoried in the store.
 
-On the basis of the production possibilities curve, what is the opportunity cost of increasing the stock of CDs from 1,500 to 2,750?
A) 1,200 DVDs. 
B) 1,600 DVDs. 
C) 2,250 DVDs. 
D) Impossible to determine from this information.

Quizplus · Accepted Answer

The opportunity cost of increasing the stock of CDs from 1,500 to 2,750 is the amount of DVDs that must be given up in order to produce the additional CDs. From the production possibilities curve, we can see that the opportunity cost of increasing the stock of CDs from 1,500 to 2,750 is 1,200 DVDs.

A Home Entertainment Shop Sells CDs and DVDs