A commercial farmer in Jos allocates all available agricultural resources to cultivate eit… — JAMB UTME

A commercial farmer in Jos allocates all available agricultural resources to cultivate either Irish potatoes or maize. Using all resources for potatoes yields $100\text{ tonnes}$ of potatoes, while using all resources for maize yields $150\text{ tonnes}$ of maize. Assuming a constant rate of substitution along the production boundary, what is the opportunity cost of producing $1\text{ tonne}$ of potatoes in terms of tonnes of maize?

Answer: 1.5 tonnes of maize

Answer

The opportunity cost of producing

1\text{ tonne}

of potatoes is

1.5\text{ tonnes}

of maize.

Producing

100\text{ tonnes}

of potatoes requires foregoing

150\text{ tonnes}

of maize. The opportunity cost per tonne of potatoes is the amount of maize sacrificed per unit of potato gained, calculated as

\frac{150\text{ tonnes of maize}}{100\text{ tonnes of potatoes}} = 1.5\text{ tonnes of maize}

Step-by-Step Solution

Determine maximum production output for both alternative crops under full resource utilization.

Maximum potato capacity =

100\text{ tonnes}

; maximum maize capacity =

150\text{ tonnes}

This establishes the production possibility boundary.

Apply the opportunity cost formula:

\text{Opportunity Cost of Good A} = \frac{\text{Quantity of Good B Foregone}}{\text{Quantity of Good A Gained}}

\text{Opportunity Cost} = \frac{150\text{ tonnes of maize}}{100\text{ tonnes of potatoes}} = 1.5\text{ tonnes of maize}

Opportunity cost quantifies the real alternative sacrifice required per unit of the chosen output.

Key Concept

Opportunity Cost

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