The table below shows the production possibilities for an economy producing Good X and Good Y: | Combination | Good X (units) | Good Y (units) | |---|---|---| | A | 0 | 50 | | B | 10 | 45 | | C | 20 | 35 | | D | 30 | 20 | | E | 40 | 0 | What is the opportunity cost of increasing the production of Go

The table below shows the production possibilities for an economy producing Good X and Goo… — JAMB UTME

The table below shows the production possibilities for an economy producing Good X and Good Y:

Combination	Good X (units)	Good Y (units)
A	0	50
B	10	45
C	20	35
D	30	20
E	40	0

What is the opportunity cost of increasing the production of Good X from 20 units to 30 units, expressed in units of Good Y?

Answer: 15 units of Good Y

Answer

The opportunity cost of increasing the production of Good X from 20 units to 30 units is 15 units of Good Y.

Moving from Combination C to Combination D on the Production Possibility Curve increases the output of Good X from 20 units to 30 units. To achieve this, the economy must reduce its output of Good Y from 35 units to 20 units. The opportunity cost is the amount of Good Y given up, which equals

35 - 20 = 15

units of Good Y.

Step-by-Step Solution

Find the initial production level of Good Y at Combination C (Good X = 20 units).

35 units of Good Y

This establishes the baseline production of Good Y prior to increasing Good X.

Find the new production level of Good Y at Combination D (Good X = 30 units).

20 units of Good Y

This establishes the remaining production of Good Y after resources are reallocated to produce 10 additional units of Good X.

Calculate the difference in Good Y output between Combination C and Combination D.

35 - 20 = 15

units of Good Y

Opportunity cost is defined as the foregone quantity of Good Y required to obtain the additional units of Good X.

Key Concept

Calculating Opportunity Cost from a Production Possibility Schedule

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