Question

A. Compute the opportunity cost in forgone consumer goods (millions of pounds of butter) for each additional unit of military output
(number of planes) produced using the table below:
Instructions: Enter your responses as a whole number.

Answer 1

The opportunity cost of producing 3 military outfits is -30.

The opportunity cost of producing 4 military outfits is -35.

The opportunity cost of producing 5 military outfits is -50.

As military outfits increase, the opportunity cost decreases.

What is opportunity cost?

Opportunity cost of the next best option forgone when one alternative is chosen over other alternatives. It is the number of consumer products that would not be produced when a producer decides to produce military outfits instead.

What is the opportunity cost of producing military outfits?

Opportunity cost = change in consumer products / change in military

The opportunity cost of producing 3 military outfits = (85 - 115) / (3 - 2) = -30

The opportunity cost of producing 4 military outfits = (50 - 85) / (4 - 3) = -35

The opportunity cost of producing 5 military outfits = (0 - 50) / (5 - 4) = -50

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