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 moves from point D to point F,where it is then producing bananas exclusively.Which of the following explanations best describes the opportunity cost involved in producing this extra 100 tonnes of bananas?
A)The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
B)The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
C)The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
D)The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
E)The opportunity cost of producing the extra bananas is independent of the amount being produced.

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 moves from point D to point F,where it is then producing bananas exclusively.Which of the following explanations best describes the opportunity cost involved in producing this extra 100 tonnes of bananas?
A)The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
B)The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas. 
C)The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
D)The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton. 
E)The opportunity cost of producing the extra bananas is independent of the amount being produced.

Quizplus · Accepted Answer

Moving from point D to point F involves a significant shift of resources from cotton to bananas. At point D, the economy produces 200 tonnes of cotton and 400 tonnes of bananas. At point F, it produces 500 tonnes of bananas and zero tonnes of cotton. This means that the opportunity cost of producing an extra 100 tonnes of bananas at point F is very high because resources that were previously used to produce cotton, which has a higher opportunity cost than bananas, are now being diverted to produce bananas. Therefore, choice A is the correct answer.

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