Figure 2-2 Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
-Refer to Figure 2-2.What is the opportunity cost of one dozen orchids?

Question

Figure 2-2  Figure 2-2 above shows the production possibilities frontier for Vidalia,a nation that produces two goods,roses and orchids.
-Refer to Figure 2-2.What is the opportunity cost of one dozen orchids?

Quizplus · Accepted Answer

The opportunity cost of one dozen orchids is the amount of roses given up to produce one dozen orchids. Moving from point A to point B on the production possibilities frontier, the economy produces one dozen more orchids but must give up 2.5 dozen roses (from 17.5 to 15) as a result. This means the opportunity cost of one dozen orchids is 2.5 dozen roses. Therefore, the best choice is to produce at point B to maximize the production of both goods.

Figure 2-2 Figure 2-2 Above Shows the Production Possibilities