The opportunity cost of producing more of one good on a production possibilities frontier is
A) a dollar amount.
B) a ratio of quantities.
C) a ratio of prices.
D) equal to the area inside the production possibilities frontier.
E) a theoretical concept which cannot be measured.

Question

Quizplus · Accepted Answer

Opportunity cost refers to the value of the next best alternative that must be foregone in order to produce more of a particular good. On a production possibilities frontier, increasing the production of one good requires sacrificing the production of the other good. The opportunity cost of producing more of one good is therefore represented by the ratio of the quantities of the two goods that must be forgone in order to produce an additional unit of the chosen good. This is best represented by choice B, which states that opportunity cost is a ratio of quantities.

The Opportunity Cost of Producing More of One Good on a Production