Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas. FIGURE 1-7
-Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy is currently producing 1280 tonnes of cotton and 200 tonnes of bananas.What is the opportunity cost of increasing production of bananas by 100 tonnes?
A)100 tonnes of cotton
B)360 tonnes of cotton
C)360 tonnes of bananas
D)920 tonnes of cotton
E)there is no opportunity cost

Question

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods - cotton and bananas.  FIGURE 1-7
-Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods - cotton and bananas,both measured in tonnes produced per year.Suppose this economy is currently producing 1280 tonnes of cotton and 200 tonnes of bananas.What is the opportunity cost of increasing production of bananas by 100 tonnes?
A)100 tonnes of cotton 
B)360 tonnes of cotton 
C)360 tonnes of bananas 
D)920 tonnes of cotton 
E)there is no opportunity cost

Quizplus · Accepted Answer

To increase the production of bananas by 100 tonnes, the economy must reduce the production of cotton by a certain amount. From the graph, we can see that to produce an additional 100 tonnes of bananas, the economy must give up producing 360 tonnes of cotton. Therefore, the opportunity cost of increasing production of bananas by 100 tonnes is 360 tonnes of cotton. The correct answer is B.

Figure 1-7 Shows the Production Possibilities Boundary for an Economy