Question

Scenario

The economic concept of cost differs from the everyday notion of a monetary payment. In economics, the cost of doing something is what you have to give up to be able to do it. In this sense, you can face a cost even if you do not have to pay anyone anything. Economists refer to this as an opportunity cost.

Suppose that a farmer has land that can produce 20 bushels of corn per acre or 10 bushels of wheat per acre. She currently is producing 100 bushels of corn and 100 bushels of wheat.

Based on the above scenario, one of the unusual features of opportunity cost is that you can describe the cost of either good in terms of the other. If the cost of wheat is 2 bushels of corn per bushel of wheat, what is the cost, in bushels of wheat, of a bushel of corn?

Select one:

A. 10 bushels of wheat

B. 2 bushels of wheat

C. 0.5 bushel of wheat

D. 0.1 bushel of wheat

Answer 1

The cost of opportunity cost of corn in terms of wheat is 10 / 20 = 0.5 wheat per corn.

The answer is "C", 0.5 bushels of wheat. that means for growing a bushel of corn the farmer has to give up 0.5 bushels of wheat only.