The United States can use all its resources to produce 250 DVDs or 500 shoes.China can use all of its resources to produce 30 DVDs or 300 shoes.The opportunity cost of producing a DVD in the United States is
A) 2 shoes.
B) 1/2 of a shoe.
C) 20 shoes.
D) 500 shoes.
E) 1 DVD.

Question

Quizplus · Accepted Answer

The opportunity cost of producing one DVD in the United States is the amount of shoes that could have been produced instead. Given the production possibilities, the U.S. can produce 250 DVDs or 500 shoes, meaning for each DVD produced, 500/250 = 2 shoes are forgone. Hence, the opportunity cost of producing a DVD in the U.S. is 2 shoes.

The United States Can Use All Its Resources to Produce