Answer to Question #60273 in Economics of Enterprise for Zach

Question

Possibility Cars (hundreds) Bicycles (hundreds)
A 15 0
B 11 5
C 8 7
D 5 9
E 0 11

Determine the opportunity cost of additional production at different outputs.
Determine which particular combination(s) is most efficient

Answer 1

The opportunity cost of additional production is:
Between points A and B: 1 car = 1.2 bicycles, 1 bicycle = 0.8 car.
Between points B and C: 1 car = 0.66 bicycles, 1 bicycle = 1.5 car.
Between points C and D: 1 car = 0.66 bicycles, 1 bicycle = 1.5 car.
Between points D and E: 1 car = 0.4 bicycles, 1 bicycle = 2.5 car.
Combination B is most efficient, because at this point the total amount of production is the highest (11 + 5 = 16 hundreds).