Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina. Refer to the tables. If North Cantina is producing at production alternative B, the opportunity cost of the eleventh unit of consumer goods will be
A) 10 units of capital goods.
B) ¼ of a unit of capital goods.
C) 8 units of capital goods.
D) ⅛ of a unit of capital goods.

Question

Answer the question on the basis of the following production possibilities tables for two countries, North Cantina and South Cantina.  Refer to the tables. If North Cantina is producing at production alternative B, the opportunity cost of the eleventh unit of consumer goods will be
A) 10 units of capital goods. 
B) ¼ of a unit of capital goods. 
C) 8 units of capital goods. 
D) ⅛ of a unit of capital goods.

Quizplus · Accepted Answer

At production alternative B, North Cantina is producing 20 units of consumer goods and 5 units of capital goods. Moving from 10 units to 11 units of consumer goods means that North Cantina must give up ⅛ (or 0.125) units of capital goods. This is calculated by dividing the decrease in capital goods (1 unit) by the increase in consumer goods (10 units). Therefore, the opportunity cost of the eleventh unit of consumer goods is ⅛ of a unit of capital goods.

Answer the Question on the Basis of the Following Production