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

question 90

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:

ATC

Average Total Cost, the total cost per unit of output when all fixed and variable costs are considered.

Perfectly Competitive Firm

A firm in a perfectly competitive market that cannot influence the market price and thus takes the price as given for its decision making.

Economic Costs

Economic Costs include both the explicit costs (direct payments) and implicit costs (opportunity costs) associated with the resources used in the production of goods or services.

Sports Data

Information and statistics collected from sporting events, which can include player performance, game outcomes, and other relevant metrics for analysis and decision-making.