Use the following to answer question(s):
Exhibit: Production Possibilities Curve for Firms A and B

-(Exhibit: Production Possibilities Curve for Firms A and B. In Firm B, the opportunity cost of producing 1 more unit of good X is:
A) 1/2 unit of Y.
B) 2 units of Y.
C) 20 units of Y.
D) 40 units of Y.

Question

Use the following to answer question(s): 
Exhibit: Production Possibilities Curve for Firms A and B
 
-(Exhibit: Production Possibilities Curve for Firms A and B. In Firm B, the opportunity cost of producing 1 more unit of good X is:
A) 1/2 unit of Y. 
B) 2 units of Y. 
C) 20 units of Y. 
D) 40 units of Y.

Quizplus · Accepted Answer

The opportunity cost of producing 1 more unit of good X is the amount of good Y that must be given up. In Firm B, the production possibilities curve is a straight line, which means that the opportunity cost of producing 1 more unit of good X is constant. The slope of the production possibilities curve is -1/2, which means that for every 1 unit of good X that is produced, 1/2 unit of good Y must be given up.

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