Question

Production Possibility Frontier-Country X 9 A 15,7 10,6 15, 4 10,4 18, 2 20,0 20 10 15 25 MP3 Players Daily production Consider the Production Possibility Frontier for country X producing 2 groups of goods, MP3 players and watches. The opportunity cost of moving from the combination of MP3 players and watches B to C is 2 watches. 4 watches. O 5 MP3 players

Answer 1

Ans.) 2 watches

The opportunity cost is the cost of other alternative forgone. From the diagram it is clear that if we move from point B(10,6) to point C(15,4), the country X will be producing 5 more MP3 players but for that the production of watches will be decreased by 2 units i.e from 6 watches,now the economy is only able to produce 4 watches. Therefore the opportunity cost of 5 more MP3 players is 2 watches,more precisely the opportunity cost of moving from combination B to C is 2 watches.