Question

an econony produces two goods : wheat and rice. These could be produced in only two combinations. combination A : wheat:20000 tonnes ; rice : 5000 tonnes in economic combination B : wheat : 10000 tonnes ; rice :9000 tonnes
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Answer 1

ECONOMICS

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Asked on November 22, 2019 by

Sarah Ram

An economy produces two goods: wheat and rice. These could be produced in only two combinations.

Combination A: Wheat: 20,000 tonnes; Rice: 5,000 tonnes

Combination B: Wheat: 10,000 tonnes; Rice: 9,000 tonnes

What is the marginal opportunity cost of producing an extra tonne of rice at the cost of wheat? (Compare combination A with combination B)

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ANSWER

Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. It the cost for the next best option chosen.

Here, Opportunity cost will be that of producing rice by sacrificing wheat production.

Marginal Opportunity Cost=

Gain of Rice Production

Loss of Wheat Production

=

4,000

10,000

= 2.5

Therefore, while comparing Combination A to Combination B, we get Marginal Opportunity Cost as 2.5.