
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN: 9780190931919
Author: NEWNAN
Publisher: Oxford University Press
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Transcribed Image Text:**Educational Resource Content: Opportunity Cost Calculation**
**Problem Statement:**
a. Compute the opportunity cost in forgone consumer goods (millions of pounds of butter) for each additional unit of military output (number of planes) produced using the table below:
**Instructions:**
- Enter your responses as whole numbers.
| **Military Output** (number of planes) | **0** | **1** | **2** | **3** | **4** | **5** |
|----------------------------------------|-------|-------|-------|-------|-------|-------|
| **Consumer Goods Output** (millions of pounds of butter) | 100 | 90 | 75 | 55 | 30 | 0 |
| **Opportunity Cost** | - | | | | | |
**Analysis of the Table:**
1. **Military Output and Consumer Goods Output:**
- The table lists the output of consumer goods (in millions of pounds of butter) corresponding to different levels of military output (number of planes produced).
- As the military output increases, the consumer goods output decreases.
2. **Opportunity Cost Calculation:**
- The opportunity cost is the amount of consumer goods forgone to produce an additional unit of military output.
**Steps for Calculation:**
- For 0 to 1 military unit, the opportunity cost is \( 100 - 90 = 10 \) million pounds of butter.
- For 1 to 2 military units, the opportunity cost is \( 90 - 75 = 15 \) million pounds of butter.
- For 2 to 3 military units, the opportunity cost is \( 75 - 55 = 20 \) million pounds of butter.
- For 3 to 4 military units, the opportunity cost is \( 55 - 30 = 25 \) million pounds of butter.
- For 4 to 5 military units, the opportunity cost is \( 30 - 0 = 30 \) million pounds of butter.
Thus, the completed table for opportunity cost will be:
| **Military Output** (number of planes) | **0** | **1** | **2** | **3** | **4** | **5** |
|----------------------------------------|-------|-------|-------|-------|-------|-------|
| **Consumer Goods Output** (millions of pounds of butter) |
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