Question

The production possibilities curve below shows the hypothetical relationship between the production of guns (national defense) and butter (social goods) in an economy. Combination Guns Butter A 0 4 B 14 3 C 26 2 D 36 1 E 44 0 Your response should be a number ONLY. What is the marginal opportunity cost of producing the second unit of butter

Answer 1

If we will increase the production of butter from 1 to 2, then the Guns production will decreases from 36 to 26. Thus, marginal opportunity cost of second unit of butter is 10 guns.

What is marginal opportunity cost?

The marginal opportunity cost refers to the measurement of the amount of a good that has to be sacrificed for each additional unit of the other good.

It is the cost incurred during the production of a unit or item.

Formula of Marginal opportunity cost =△gain of output △loss of output.

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