Figure 2-2

Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables.
-Refer to Figure 2-2.What is the opportunity cost of one pound of meat?

Question

Figure 2-2

Figure 2-2 above shows the production possibilities frontier for Mendonca, an agrarian nation that produces two goods, meat and vegetables.
-Refer to Figure 2-2.What is the opportunity cost of one pound of meat?

Quizplus · Accepted Answer

The opportunity cost of one pound of meat is the amount of vegetables that must be given up to produce one additional pound of meat. From the graph, this is equivalent to moving from point A to point B, which requires giving up 1.1 pounds of vegetables. Therefore, the opportunity cost of one pound of meat is 1.1 pounds of vegetables. To maximize their production and consumption possibilities, Mendonca should produce at point C where they are producing at their comparative advantage. This means producing more vegetables and less meat than they would if they were producing at point A or B.