1 Consider two points on the PPF point A of which there are

1. Consider two points on the PPF: point A, of which there are 50 watermelon and 100 grapes, and point B, of which there are 51 watermelon and 98 grapes. If the economy is currently at point B, the opportunity cost of moving to point A is:

A.) 2 Grapes

B.) 1 Watermelon

C.) 98 Grapes

D.) 3 Watermelons

Solution

The opportunity cost is the cost which we gave up for producing an extra unit of some other group. Here, we gave up 1 watermelon to produce 2 more grapes.

The answer is \"B\", 1 watermelon.