Question

Consider the following table:

Production Possibilities	A	B	C	D	E
Guns (Units)	0	1	2	3	4
Butter (Units)	10	9	7	4	0

The opportunity cost of increasing guns production from 2 to 3 units is ______ units of butter.

Options

• 7

• 2

• 4

• 3

Answer 1

The opportunity cost of increasing guns production from 2 to 3 units is 3 units of butter.

Explanation:

When gun production increases from 2 to 3 units, butter production falls from 7 to 4 units.

$$MOC = 7 - 4 = 3$$ units of butter.