Suppose that opportunity costs are constant and that Fred can either bake a maximum of six pies or three cakes in a day. Ethel can either produce a maximum of eight pies or two cakes in a day. Fred's opportunity cost to produce one cake is
A) one-half pie.
B) two pies.
C) six pies.
D) four pies.

Question

Quizplus · Accepted Answer

For Fred, the opportunity cost of producing one cake is the number of pies he could have produced instead. Since he can make a maximum of six pies in a day and three cakes in a day, his opportunity cost to produce one cake is two pies (6 pies / 3 cakes = 2 pies per cake). Therefore, the correct answer is B.

Suppose That Opportunity Costs Are Constant and That Fred Can