Question

Alpha and Beta, two small economies, can produce cheese or butter with the same resource, raw milk. Assuming constant opportunity costs, Alpha can produce either 30 pounds of cheese or 15 pounds of butter per day. Beta can produce either 40 pounds of cheese or 10 pounds of butter per day.
The opportunity cost of producing one pound of butter for Alpha is

a. two-thirds of a pound of cheese.
b. half of a pound of cheese.
c. two pounds of cheese.
d. one pound of cheese.
e. one and a half pounds of cheese

Answer 1

Answer:

C

Explanation:

Opportunity cost is the cost of the next best option forgone when one alternative is chosen over other alternatives.

By choosing to produce one pound of butter, Alpha is forgoing the opportunity to produce one more pound of cheese

Opportunity cost = 30/15 = 2