Refer to the graph shown. In the graph, the opportunity cost of good X in terms of good Y is:
A. higher along segment AB than along segment BC.
B. lower along segment AB than along segment BC.
C. the same on both segments.
D. always increasing as we move from A to C.
Answer:B
Refer to the graph shown. In the graph, the opportunity cost of good X in terms of good Y is:
A. higher along segment AB than along segment BC. B. lower along segment AB than along segment BC. C. the same on both segments. D. always increasing as we move from A to C.
Explanation: The slope of the production possibility curve represents the opportunity cost of producing one good in terms of another. Since this slope is greater along BC than along AB, the opportunity cost of producing X in terms of Y is higher along the former. Note that the slope is constant along both BC and AB and slope changes only when we move from one segment to the other.