The following Table shows a farm\'s production possibilities. __________________
ID: 1223717 • Letter: T
Question
The following Table shows a farm's production possibilities.
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Soybean Chicken
(bushels) (pounds)
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400 and 0
300 and 300
100 and 500
0 and 600
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If the farm uses its resources efficiently, what is the opportunity cost of an increase in soybean production from 0 bushels to 100 bushels? Explain briefly.
Explanation / Answer
OPPORTUNITY COST IS THE OPPORTUNITY FOREGONE IN FAVOR OF THE CHOSEN ALTERNATIVE. LIKE HAVING LIMITED MONEY IN HAND AND BALANCING THE PURCHASE OF ONE ITEM ONLY OR A MIX OF TWO PRODUCTS.
SO IN OUR CASE IF WE WANT TO INCREASE THE OUTPUT OF SOYBEAN FROM 0 TO 100, WE WILL HAVE TO REDUCE THE CHICKEN PRODUCTION BY 100 POUNDS.
HENCE THE OPPORTUNITY COST OF 100 BUSHELS SOYBEAN IS 100 POUNDS OF CHICKEN.