Question

Suppose an economy produces only two goods, namely wheat and cloth, with its available resources. Following table shows different possibilities of production of what and cloth. Calculate the marginal opportunity cost of cloth at various combination. Also, draw the production possibility curve.

Cloth (Thousand bales)	$0$	$1$	$2$	$3$	$4$
Wheat (Lakh tonnes)	$100$	$90$	$70$	$40$	$0$

Answer 1

Cloth (Thousand bales)	Wheat (Lakh tonnes)	Marginal Opportunity Cost
$0$	$100$	-
$1$	$90$	$\frac{10}{1}=10$
$2$	$70$	$\frac{20}{1}=20$
$3$	$40$	$\frac{30}{1}=30$
$4$	$0$	$\frac{40}{1}=40$