Figure 2-8

Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids.
-Refer to Figure 2-8.What is the opportunity cost of 100 dozen roses?

Question

Figure 2-8
  
Figure 2-8 above shows the production possibilities frontier for Vidalia, a nation that produces two goods, roses and orchids.
-Refer to Figure 2-8.What is the opportunity cost of 100 dozen roses?

Quizplus · Accepted Answer

According to the production possibilities frontier in Figure 2-8, to produce 100 dozen roses, Vidalia would have to give up producing 4 dozen orchids (from point A to point B). Therefore, the opportunity cost of 100 dozen roses is 40 dozen orchids. To maximize their production and efficiency, Vidalia should produce at point C, where they are producing 75 dozen roses and 30 dozen orchids. This is the point on the frontier where they are utilizing all their resources efficiently, and any other point would result in the sacrifice of potential production.

Figure 2-8 Figure 2-8 Above Shows the Production Possibilities Frontier for Vidalia