FOOD (Thousands of pounds) 2 0 0 40 80 C 120 160 200 240 280 320 OIL (Thousands of barrels) Suppose the economy initially produces 6,000 pounds of food and 200,000 barrels of oil, which is represented by point A. The opportunity cost of producing an additional 2,000 pounds of food (that is, moving production to point B) is barrels of oil. Suppose, instead, that the economy currently produces 168,000 barrels of oil and 8,000 pounds of food, which is represented by point B. Now the opportunity cost of producing an additional 2,000 pounds of food (that is, moving to point C) is barrels of oil. Comparing your answers in the two previous paragraphs, you can see that the opportunity cost of 2,000 additional pounds of food at point B is the opportunity cost of 2,000 additional pounds of food at point A. This reflects the
FOOD (Thousands of pounds) 2 0 0 40 80 C 120 160 200 240 280 320 OIL (Thousands of barrels) Suppose the economy initially produces 6,000 pounds of food and 200,000 barrels of oil, which is represented by point A. The opportunity cost of producing an additional 2,000 pounds of food (that is, moving production to point B) is barrels of oil. Suppose, instead, that the economy currently produces 168,000 barrels of oil and 8,000 pounds of food, which is represented by point B. Now the opportunity cost of producing an additional 2,000 pounds of food (that is, moving to point C) is barrels of oil. Comparing your answers in the two previous paragraphs, you can see that the opportunity cost of 2,000 additional pounds of food at point B is the opportunity cost of 2,000 additional pounds of food at point A. This reflects the
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 8SQ
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