Exhibit 2-1 Production Possibilities Curve Data In Exhibit 2-1, Why Is the Opportunity Cost of Producing

question 36

Multiple Choice

Exhibit 2-1 Production possibilities curve data $$\begin{array} { | c | c | } \hline \begin{array} { c } \text { Consumption } \\\text { Goods }\end{array} & \begin{array} { c } \text { Capital } \\\text { Goods }\end{array} \\\hline 10 & 0 \\9 & 1 \\7 & 2 \\4 & 3 \\0 & 4 \\\hline\end{array}$$ In Exhibit 2-1, why is the opportunity cost of producing the fourth unit of capital 4 units of consumption goods but the opportunity cost of producing 4 units of capital is 10 units of consumption goods?

• A) It isn't. The opportunity cost of the fourth unit and the opportunity cost of four units is the same.
• B) Because consumption goods are more valuable than capital goods.
• C) Because the opportunity cost of capital goods is constant while the opportunity cost of consumption goods is decreasing as this economy moves from more consumption goods to more capital goods.
• D) Because the opportunity cost of the fourth unit of capital is the consumption goods that must be given up for this economy to move from three units of capital to four units of capital, but the opportunity cots of four units of capital is the amount of consumption goods that must be given up to go from zero units of capital to four units of capital.

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Definitions:

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