With a budget of $200 million,the government can choose to purchase 4 helicopters or repair 200 km of highway. FIGURE 1-1
-Refer to Figure 1-1.For the government,the opportunity cost of one search and rescue helicopter is
A)0 kilometres of highway repair.
B)50 kilometres of highway repair.
C)100 kilometres of highway repair.
D)150 kilometres of highway repair.
E)200 kilometres of highway repair.

Question

With a budget of $200 million,the government can choose to purchase 4 helicopters or repair 200 km of highway.  FIGURE 1-1
-Refer to Figure 1-1.For the government,the opportunity cost of one search and rescue helicopter is
A)0 kilometres of highway repair. 
B)50 kilometres of highway repair. 
C)100 kilometres of highway repair. 
D)150 kilometres of highway repair. 
E)200 kilometres of highway repair.

Quizplus · Accepted Answer

To find the opportunity cost, we need to calculate the amount of highway repair that could be done with the same budget as one helicopter. 
Cost of 4 helicopters = $200 million
Cost of one search and rescue helicopter = $50 million (i.e. $200 million / 4)
200 km of highway repair can be done with $200 million
Therefore, the opportunity cost of one search and rescue helicopter is equal to the amount of highway repair that could be done with the same amount of money. 
Opportunity cost of one search and rescue helicopter = $50 million = repair of 50 km of highway. 
Thus, the best choice for the government is to repair 200 km of highway as it would have a greater benefit for a larger number of people than just buying 4 helicopters.

With a Budget of $200 Million,the Government Can Choose to Purchase