A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule. The marginal opportunity cost of the third unit of steel is
A) 18.3 units of wheat.
B) 25 units of wheat.
C) 20 units of wheat.
D) 55 units of wheat.

Question

A nation can produce two products: steel and wheat. The table below is the nation's production possibilities schedule.  The marginal opportunity cost of the third unit of steel is
A) 18.3 units of wheat. 
B) 25 units of wheat. 
C) 20 units of wheat. 
D) 55 units of wheat.

Quizplus · Accepted Answer

The marginal opportunity cost of a certain good is the amount of the other good that must be given up in order to produce an additional unit of the first good. To find the marginal opportunity cost of the third unit of steel, we look at the change in opportunity cost from producing the second unit of steel to producing the third. The opportunity cost of the second unit of steel is 15 units of wheat, and the opportunity cost of the third unit of steel is 20 units of wheat. Therefore, the marginal opportunity cost of the third unit of steel is 20 - 15 = 5 units of wheat.

A Nation Can Produce Two Products: Steel and Wheat