Question

Citizens of a country produce two goods, garlic and wool, according to the following production possibility schedule:

Garlic (Units)	$0$	$150$	$300$	$450$	$600$	$750$	$900$
Wool (Units)	$450$	$375$	$300$	$225$	$150$	$75$	$0$

Find the opportunity cost of producing additional garlic. Is it constant or increasing? Draw a suitable diagram.

Answer 1

Garlic (Units)	Wool (Units)	Marginal Opportunity Cost
$0$	$450$	-
$150$	$375$	$\frac{75}{150}=0.5$
$300$	$300$	$\frac{75}{150}=0.5$
$450$	$225$	$\frac{75}{150}=0.5$
$650$	$150$	$\frac{75}{150}=0.5$
$750$	$75$	$\frac{75}{150}=0.5$
$900$	$0$	$\frac{75}{150}=0.5$

Marginal opportunity cost $=\frac{△\text{loss of wool production}}{△\text{gain of garlic production}}=0.5$
Opportunity cost of producing additional garlic remains constant, i.e., $0.5$.