Question

The opportunity cost of increasing production of Cellphones from nil to $2,000$ units is __________.

Situation	Cellphones(units)	Rice(quintals)
A	$0$	$60,000$
B	$1000$	$55,000$
C	$2000$	$48,000$
D	$3000$	$38,000$
E	$4000$	$23,000$
F	$5000$	$0$

• A. $12,000$ quintals of rice
• B. $5,000$ quintals of rice
• C. $7,000$ quintals of rice
• D. Nil

Answer 1

Answer: (A)

$12,000$ quintals of rice

Opportunity cost of production of a commodity refers to the sacrifice made in terms of the next best alternative which could be produced out of that resources in order to produce every unit of the given commodity. Therefore, to produce 2000 cellphones from nil, rice production is reduced from 60,000 quintals to 48,000 quintals, which indicates that 12000 quintals of rice is to be sacrificed.