Question

If he devotes all of his available resources to cantaloupe production, a farmer can produce 120 cantaloupes. If he sacrifices 1.5 watermelons for each cantaloupe that he produces, it follows that:____________
A. If he devotes all of his available resources to watermelon production, then he can produce 80 watermelons.
B. He cannot have comparative advantage over other farmers in producing cantaloupes.
C. His opportunity cost of one watermelon is 2/3 of a cantaloupe.
D. His production possibilities frontier is bowed-out.

Answer 1

Answer:

C. His opportunity cost of one watermelon is 2/3 of a cantaloupe.

Explanation:

Opportunity cost refers to units of production sacrificed of one good to produce an extra unit of another good.

In the given case, for every 1 unit of Cantaloupe, a farmer is required to sacrifice the production of 1.5 units of watermelon.

This means, production of 1 cantaloupe = production of 1.5 water melons.

Thus, to produce an additional unit of watermelon, sacrifice of 1/1.5 cantaloupe is required.

This means, the farmer's opportunity cost of one watermelon in the form of cantaloupe sacrificed is 2/3 of a cantaloupe.