Question

When bill’s diner moves from the production combination of 35 burgers and 25 hot dogs to the combination of 25 burgers and 65 hot dogs, what is the opportunity cost of each additional hot dog?.

Answer 1

The opportunity cost of each additional hot dog will be 0.25 burgers.

What is opportunity cost?

An opportunity cost means the forgone benefit which would have been benefited from an action, option or transaction which was not chosen.

Here, the movement from one production point to another means that they are producing 10 less burgers and 40 more hot dogs.

This translates that in order to produce 40 more hot dogs, Bill's diner will have to forego production of 10 burgers.

Hence, the opportunity cost of each 1 additional hot dog will be:

= 10/40

= 0.25 burgers

Therefore, the opportunity cost of each additional hot dog will be 0.25 burgers.

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