CA Foundation P4 · Chapter 1 · Question 14 of 15
An economy can produce the following combinations of machines and wheat (tonnes): A: 0 machines, 100 wheat B: 10 machines, 95 wheat C: 20 machines, 85 wheat D: 30 machines, 70 wheat E: 40 machines, 50 wheat What is the opportunity cost per machine of moving from D to E?
Test yourself: pick an answer
Reveal answer & explanation
Correct answer: B) 2 tonnes of wheat
Explanation
Moving from D to E, machines rise by 40 - 30 = 10 and wheat falls by 70 - 50 = 20 tonnes. Opportunity cost per machine = 20 / 10 = 2 tonnes of wheat. 1.5 tonnes is the C-to-D figure (15/10), and 1.25 tonnes is the average over A to E (50/40).