Chapter 1R, Problem 9MCQ

To determine

The question requires us to determine the opportunity cost of increasing the annual output of potatoes.

Explanation of Solution

The following graph represents the PPC for potatoes and fish in the Atlantis economy:

  

To increase the annual output of potatoes from 600 to 800 pounds (movement from point C to point B in the graph), the economy needs to reduce the fish production from 500 to 300 pounds to stay efficient. This fall in the fish production (200 units) represents the opportunity cost of increasing the annual production of potatoes.

The opportunity cost of producing potatoes = 500 − 300 = 200 pounds of fish.

Thus, the opportunity cost of increasing production of the annual output of potatoes from 600 to 800 pounds is 200 pounds of fish that the producer has to foregone to gain potatoes.

Therefore, option “a” is correct.

Economics Concept Introduction

The production possibility curve (PPC) represents the all possible combination of two goods that can be produced by using the given resources in an economy.