Figure 1-7 Shows the Production Possibilities Boundary for an Economy

question 17

Multiple Choice

Figure 1-7 shows the production possibilities boundary for an economy that produces two goods-cotton and bananas. FIGURE 1-7 Refer to Figure 1-7.A production possibilities boundary is shown for an economy that produces two goods-cotton and bananas,both measured in tonnes produced per year.Suppose this economy moves from point D to point F,where it is then producing bananas exclusively.Which of the following explanations best describes the opportunity cost involved in producing this extra 100 tonnes of bananas?

• A)The opportunity cost is very high in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
• B)The opportunity cost is very low in this case because resources that are probably much better suited to producing cotton are now being devoted to producing bananas.
• C)The opportunity cost is very high in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
• D)The opportunity cost is very low in this case because resources that are probably much better suited to producing bananas are now being devoted to producing cotton.
• E)The opportunity cost of producing the extra bananas is independent of the amount being produced.

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Definitions:

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