Question

If a family spends its entire budget in a given time frame, the family can afford either 80 cans of beans or 45 frozen dinners. Assuming the family spends its entire budget on just these two goods, what is the opportunity cost of a can of beans in terms of frozen dinners in the time frame? (Round your answer to two decimal places.)

Answer 1

Answer:

0.56

Explanation:

Opportunity cost refers to the alternative forgone from a list of preference. It is a concept in economics developed as a result of the scarce resources available to satisfy unlimited wants.

Since the family can afford either 80 cans of beans or 45 frozen dinners.

it means that for every 1 can of beans purchased, 45/80 frozen dinner will be let go or not be purchased. Also, for unit of frozen dinners purchased, the family sacrifices the purchase of 80/45 cans of beans.

Hence the opportunity cost of a can of beans in terms of frozen dinners in the time frame

= 45/80 frozen dinner

= 0.5625

to 2 decimal place = 0.56