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Determine the opportunity cost of additional production at different outputs (meaning find the...

Question:

Determine the opportunity cost of additional production at different outputs (meaning find the opportunity cost for each different possibility).

Determine which particular combination(s) is most efficient for: (i) car production; (ii) bicycle production. What do the patterns of opportunity costs reflect?

Possibility Cars (hundreds) Bicycles (hundreds)
A 15 0
B 11 5
C 8 7
D 5 9
E 0 11

Calculating Opportunity Cost for a Commodity

Opportunity cost (OC) is a fundamentally important concept in economics. It measures what must be sacrificed in terms of the output of one commodity in order to expand output of another commodity. The OC for a commodity typically follows a predictable pattern as its output expands.

Answer and Explanation:

The following table shows the calculated OC's associated with increasing production for each of the two commodities. Consider first the case of cars....

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Law of Increasing Opportunity Cost: Definition & Concept

from AEPA Economics (AZ035): Practice & Study Guide

Chapter 2 / Lesson 8
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