Question

Suppose a gardener produces both tomatoes and squash in his garden. If the opportunity cost of one bushel of squash is 2/5 bushel of tomatoes, then the opportunity cost of 1 bushel of tomatoes is__________________.

Answer 1

The opportunity cost of 1 bushel of tomatoes is 5/2 bushels of squash.

Explanation:

If economists lay claim to a source of money's "opportunity cost," they indicate the importance of its next best-rated alternative use.

For example, if you spend millions of dollars in a movie, you can't fully spend all the time reading a novel at home, and neither can you spend all the money on anything else.

When you can not get to a definite conclusion, you can calculate the cost of your opportunity with a very simple equation: divide the losses by whatever you can earn from choosing one position over another.