If Countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the production possibilities schedules below: In country A the opportunity cost of 1 paper clip is:

Question

If Countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the production possibilities schedules below:  In country A the opportunity cost of 1 paper clip is:

Quizplus · Accepted Answer

The opportunity cost of 1 paper clip is the amount of rubber bands that must be given up to produce 1 paper clip. In Country A, to produce 1 paper clip, 2 rubber bands must be given up (from the PPS chart). Therefore, the opportunity cost of 1 paper clip is 2 rubber bands. Choice C is the closest approximation to this number, indicating that it takes 1/2 rubber band to produce 1 paper clip.

There is no “best choice” for this question. The correct answer is C, and the explanation above supports this answer.

If Countries a and B Produce Only Either Rubber Bands