A. 0.4 dozen roses C. 2.5 dozen roses E. 40 dozen roses B. 7.25 dozen roses D.16

Question

A. 0.4 dozen roses C. 2.5 dozen roses E. 40 dozen roses

B. 7.25 dozen roses D.16 dozen roses

2. Suppose Metsville is currently producing 120 roses per period. How many orchids is it also producing, assuming that resources are fully utilized?

A. 20 dozen orchids C. 30 dozen orchids

B. 38 dozen orchids D. 40 dozen orchids

E. 32 orchids

What is Metsville’s opportunity cost of 200 roses?

A. 0.4 dozen orchids B. 2.5 dozen orchids C. 16 dozen orchids D. 80 dozen orchids E. 40 dozen orchids

*****Please show your work so I can see how you got these answers.

d orchids. The co two goods that can be produced are presented by the graph below. Use this graph to answer questions 14- 16. Roses (dozens) 200 160 120 80 40 20 40 60 80Orchids (dozens) 0

Explanation / Answer

1. The opportunity cost of one dozen orchids is the amount of roses not produced when all resources are producing a dozen orchid. When 80 dozen orchids are produced, 200 dozen roses are not prdouced. Hence the opportunity cost of 80 dozen orchids is 200 dozen roses and that of one dozen orchid is 200/80 = 2.5 dozen roses.

2. Just as the opportunity cost of one dozen orchids is 2.5 dozen roses, the opportunity cost of one dozen roses is 1/2.5 dozen orchids. Now see that from 200 dozen roses to reach 120 dozen roses, there is a loss of 80 dozen roses. This implies the nation must be producing 80/2.5 = 32 orchids.

3. As mentioned, the opportunity cost of one dozen roses is 1/2.5 dozen orchids. Then the opportunity cost of 200 dozen roses is 200/2.5 = 80 dozen orchids.

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