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. Ethel'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

Ethel's opportunity cost to produce one cake is four pies because she gives up producing four pies (8 pies/2 cakes) to produce one cake.

Suppose That Opportunity Costs Are Constant and That Fred Can