Question

g Suppose that a pizza store sells pizza and French fries, and their opportunity costs are constant. Assume now that one of the ovens broke and the amount of pizza which can be produced per hour decreased. In this case, the opportunity cost of French fries a. Decreases. b. Does not change. c. Increases. d. Can either increase or decrease (need more information).

Answer 1

Answer:

A) Decreases , or D) Can increase or decrease (need more information)

Explanation:

Opportunity Cost is the cost of next best alternative foregone, while choosing an alternative.

Here, Opportunity cost of french fries - is the units of pizza sacrifised while making a unit french fries.

When oven broke, pizza that can be produced decrease.

• If oven break effects (negatively) only pizza, & french fries production capacity stays same ie constant - opportunity cost of french fries {ie pizza sacrifised} decreases
• If oven break effects pizza & french fries production capacity both - then opportunity cost of french fries changes (increase or decrease) based on their quantities' relative fall.