Assume that the production possibilities for Badlands are the following combinations of kegs of beer and pounds of beef: Which of the following is true?

Question

Assume that the production possibilities for Badlands are the following combinations of kegs of beer and pounds of beef:  Which of the following is true?

Quizplus · Accepted Answer

To calculate the opportunity cost, we need to see how much of one good we give up to produce one more unit of the other good. In this case, moving from the third to the fourth keg of beer means giving up 6 pounds of beef (from 36 to 30), so the opportunity cost of the fourth keg of beer is 6 pounds of beef. The other choices are incorrect as the opportunity cost for the second keg of beer is 18 pounds of beef, the opportunity cost for the third keg of beer is 12 pounds of beef, and the opportunity cost for the fifth keg of beer is 21 pounds of beef. However, we cannot determine the best choice based on the information given as we do not know the preferences of Badlands or the prices of beer and beef.

Assume That the Production Possibilities for Badlands Are the Following