Question

Suppose that the economy of El Paso creates only cowboy boots and pecans. The production possibilities frontier (PPF) per year for El Paso is illustrated in the graph and is currently producing at the point labeled A.

Move point B to show the economy efficiently producing one thousand more cowboy boots.

Now, determine the opportunity cost of producing an additional 1,000 cowboy boots, i.e., shifting from point A to point B. Enter your answer specified to one decimal place.

Answer 1

When the economy produces one thousand more cow boy hoots, the production of pecans falls from 5 thousand to 3.6 thousand. That is, the opportunity cost is 1.4 thousand