Suppose an economy can produce a maximum of 10 units of good X and the opportunity cost of 1X is always 2Y.What is the maximum number of units of good Y the economy can produce?
A) 10
B) 200
C) 20
D) 500
E) none of the above

Question

Quizplus · Accepted Answer

The opportunity cost of 1X is always 2Y, which means for every unit of X produced, 2 units of Y must be given up. Therefore, the economy can produce a maximum of (10X/1) x (2Y/1X) = 20Y. So, the maximum number of units of good Y the economy can produce is 20.

Suppose an Economy Can Produce a Maximum of 10 Units