Refer to the accompanying figure. The opportunity cost of producing one bushel of wheat is:
A)2 bushels of corn.
B)½ of a bushel of corn.
C)1,000 bushels of corn.
D)500 bushels of corn.

Question

Refer to the accompanying figure. The opportunity cost of producing one bushel of wheat is: 
A)2 bushels of corn. 
B)½ of a bushel of corn. 
C)1,000 bushels of corn. 
D)500 bushels of corn.

Quizplus · Accepted Answer

This farmer has to give up 500 bushels of corn to produce 1,000 bushels of wheat. So the opportunity cost of producing 1 bushel of wheat is ½ (= 500/1,000)of a bushel of corn. More generally, the opportunity cost of producing an additional unit of the good on the vertical axis is the reciprocal of the absolute value of the slope of the PPC (that is, 1/|slope|).

Refer to the Accompanying Figure