A farmer operating on a fixed piece of farmland can cultivate either yam or cassava according to the following production schedule:
| Production Option | Yam (bags) | Cassava (bags) |
|---|---|---|
| P | 100 | 0 |
| Q | 75 | 20 |
| R | 45 | 35 |
| S | 0 | 45 |
If the farmer changes production from Option Q to Option R, what is the opportunity cost of producing the additional 15 bags of cassava, expressed in bags of yam foregone?
Answer: 30 bags of yam
Answer
The opportunity cost of producing 15 additional bags of cassava when moving from Option Q to Option R is 30 bags of yam foregone.
Moving production from Option Q to Option R increases cassava production by 15 bags (from 20 to 35 bags), but requires reducing yam production from 75 bags to 45 bags. The reduction of 30 bags of yam represents the real cost or opportunity cost of producing the additional cassava.
Step-by-Step Solution
Key Concept
Opportunity Cost in Production Schedules