Consider the production possibilities frontier in the figure shown. The opportunity cost of moving from point A to point B is:

Question

Quizplus · Accepted Answer

Moving from point A to point B involves shifting resources from cigar production to car production, resulting in a tradeoff of 10 cigars for 1 car (as indicated by the decrease in the production of cigars and the increase in the production of cars). Therefore, the opportunity cost of 1 car is 10 cigars, or the opportunity cost of 1 cigar is 1/10 of a car. Hence, the opportunity cost of moving from point A to point B is: 1 car / (10 cigars / 1 car) = 0.1 car per cigar, which is equivalent to 1 car per 10 cigars. Choice C is the closest option to this calculation, as it states that the opportunity cost of moving from point A to point B is 5 cigars per car, which is the reciprocal of the calculated value (i.e. 1/0.1 = 10, and 10/2 = 5). Therefore, choice C is the best choice.

Consider the Production Possibilities Frontier in the Figure Shown