Question

Faruq spends all of his income on tacos and milkshakes. His income is $100, the price of tacos is $10, and the price of milkshakes is $2. Put tacos on the horizontal axis and milkshakes on the vertical axis. If Faruq spends all of his income, the opportunity cost of one taco equals _____ milkshakes.

Answer 1

Answer:

The correct answer is 5.

Explanation:

Faruq's income is $100. The price of tacos is $10. The price of milkshakes is $2.

If Faruq spends all his income on tacos he will be able to purchase

=  $\frac{100}{10}$

=  10 tacos

If Faruq spends all his income on milkshakes he will be able to purchase

= $\frac{100}{2}$

= 50 milkshakes

So out of his total income he can either have 50 milkshakes or 10 tacos.

The opportunity cost of a taco will be

= $\frac{whta\ is\ sacrificed}{what\ is\ gained}$

= $\frac{50}{10}$

= 5