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Fact 2.4.1
In an eight-hour day, Andy can produce either 24 loaves of bread or 8 kilograms of butter. In an eight-hour day, Rolfe can produce either 8 loaves of bread or 8 kilograms of butter.
-From Fact 2.4.1, we know that
A)Andy has the lower opportunity cost of producing bread, while Andy and Rolfe have equal opportunity costs of producing butter.
B)Andy has the lower opportunity cost of producing both bread and butter.
C)Andy has the lower opportunity cost of producing bread, while Rolfe has the lower opportunity cost of producing butter.
D)Andy has the lower opportunity cost of producing butter, while Rolfe has the lower opportunity cost of producing bread.
E)Andy has the higher opportunity cost of producing both bread and butter.

Question

Quizplus · Accepted Answer

Opportunity cost is the value of the next-best alternative forgone. In this case, Andy can produce 24 loaves of bread or 8 kilograms of butter in 8 hours, which means that the opportunity cost of producing one loaf of bread is 1/3 of a kilogram of butter. Rolfe can produce 8 loaves of bread or 8 kilograms of butter in 8 hours, which means that the opportunity cost of producing one loaf of bread is 1 kilogram of butter. Therefore, Andy has the lower opportunity cost of producing bread, while Rolfe has the lower opportunity cost of producing butter.

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