The following Table shows a farm\'s production possibilities. __________________

Question

The following Table shows a farm's production possibilities.

_____________________________________________________

Soybean                                               Chicken
(bushels)                                               (pounds)
-------------------------------------------------------------------

400                     and                                      0
300                     and                                  300
100                     and                                  500
   0                     and                                   600
------------------------------------------------------------------

If the farm uses its resources efficiently, what is the opportunity cost of an increase in soybean production from 0 bushels to 100 bushels? Explain briefly.

Explanation / Answer

OPPORTUNITY COST IS THE OPPORTUNITY FOREGONE IN FAVOR OF THE CHOSEN ALTERNATIVE. LIKE HAVING LIMITED MONEY IN HAND AND BALANCING THE PURCHASE OF ONE ITEM ONLY OR A MIX OF TWO PRODUCTS.

SO IN OUR CASE IF WE WANT TO INCREASE THE OUTPUT OF SOYBEAN FROM 0 TO 100, WE WILL HAVE TO REDUCE THE CHICKEN PRODUCTION BY 100 POUNDS.

HENCE THE OPPORTUNITY COST OF 100 BUSHELS SOYBEAN IS 100 POUNDS OF CHICKEN.

Related Questions

Navigate

• Browse (All)
• Browse T
• Subjects

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.