Iceland produces two goods: Viking hats (Y) and fish (X). Its production possibilities frontier is characterized as: Y = 50 - 2X. What is the opportunity cost of producing a tenth unit of fish (i.e., going from nine units of fish production to 10)?

Question

Quizplus · Accepted Answer

The opportunity cost of producing one more unit of fish is the slope of the PPF, which is the change in Y over the change in X. Here, the slope is -2, meaning producing one more unit of fish costs 2 Viking hats.

Iceland Produces Two Goods: Viking Hats (Y) and Fish (X)