Figure 3-3
Ice cream and cones are measured in kilograms.
-Refer to Figure 3-3. For Jerry, what is the opportunity cost of 1 kg of ice cream?
A) 1/3 kg of cones
B) 1 kg of cones
C) 3/2 kg of cones
D) 2 kg of cones

Question

Figure 3-3
Ice cream and cones are measured in kilograms. 
-Refer to Figure 3-3. For Jerry, what is the opportunity cost of 1 kg of ice cream?
A) 1/3 kg of cones 
B) 1 kg of cones 
C) 3/2 kg of cones 
D) 2 kg of cones

Quizplus · Accepted Answer

The opportunity cost of 1 kg of ice cream for Jerry is the amount of cones he could have produced instead. From the graph, we can see that the opportunity cost is equal to the slope of the production possibilities curve at the point where Jerry is producing 3 kg of ice cream. At this point, Jerry could produce either 2 kg of cones or 2/3 kg of cones. Therefore, the opportunity cost of 1 kg of ice cream is either 2 kg of cones divided by 3 kg of ice cream, which is 2/3 kg of cones, or 2/3 kg of cones divided by 1 kg of ice cream, which is 3/2 kg of cones. The best choice is therefore (C) 3/2 kg of cones, as this represents the steeper part of the curve and thus represents a higher opportunity cost.

Figure 3-3 Ice Cream and Cones Are Measured in Kilograms