Consider the table below to answer the next two questions.Quantity of XQuantity of Y080016002460 In the table above, the opportunity cost of producing more Xincreasedecrease Stays the same.First increases then decreases.

Answered: Consider the table below to answer the…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the table below to answer the next two questions.

Quantity of X	Quantity of Y
0	800
1	600
2	460

In the table above, the opportunity cost of producing more X
- increase
- decrease
- Stays the same.
- First increases then decreases.

Expert Solution

Step 1

The opportunity cost is the value of the next best alternative which is foregone while making the decision by the individual. When the individual chooses job A which pays $5,000 per month instead of B which pays $4,500 per month, then the income which could have been earned from choosing job B becomes the opportunity cost to the individual. When the case is with the producer, using the inputs for the production of one more unit of X requires the sacrifice of units of Y. Thus, the quantity of Y sacrificed to get an additional unit of X becomes the opportunity cost of producing X.

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