Question

The firm initially produced 500 pants and 700 shirts. If the firm decides to increase the number of shirts by 100 units, the opportunity cost will be pants. If the firm is at point E and decides to increase the production of shirts by 500 units, the opportunity cost will be pants.

Answer 1

If the firm decides to increase the number of shirts by 100 units, the opportunity cost will be 200 pants. If the firm is at point E and decides to increase the production of shirts by 500 units, the opportunity cost will be 400 pants.

Answer 2

Opportunity Cost is the cost which one individual or business forgoes to get another best alternative option. The opportunity cost here are 200 pants for 100 shirts and 400 pants for 500 shirts.

What is Opportunity Cost?

Opportunity cost is the cost forgone to get the next best alternative option. Opportunity cost can be bearded by a business, an individual, or an investor to get a next best alternative option.

Here the firm has to sacrifice 200 units of pants to produce 100 more units of shirts and when the firm is at point E, it has to sacrifice 400 units of pants to produce 500 more units of shirts.

Therefore, 200 and 400 is the Opportunity Cost.

Learn more about Opportunity Cost, here,

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