Question

answer the next question(s) on the basis of the data given in the following production possibilities table: production possibilities (alternatives) a b c d e f capital goods 5 4 3 2 1 0 consumer goods 0 5 9 12 14 15 refer to the above table. if the economy is producing at production alternative c, the opportunity cost of the tenth unit of consumer goods will be: a 4 units of capital goods. b 2 units of capital goods. c 3 units of capital goods. d 1/3 of a unit of capital goods.

Explanation:

Step1: Analyze production at alternative C

At alternative C, 3 units of capital goods and 9 units of consumer goods are produced.

Step2: Determine next - best alternative

To produce the 10th unit of consumer goods, we move to alternative D. At alternative D, 2 units of capital goods and 12 units of consumer goods are produced.

Step3: Calculate opportunity cost

The change in capital goods when moving from C to D is \(3 - 2=1\) unit. So the opportunity cost of the 10th unit of consumer goods is 1 unit of capital goods for every 3 additional consumer goods. For 1 additional (the 10th) consumer good, the opportunity cost is \(\frac{1}{3}\) of a unit of capital goods.

Answer:

D. \(1/3\) of a unit of capital goods.