Answer to Question #64928 in Microeconomics for muhammad dain

Question

Several years ago most major countries signed an agreement to phase out the manufacture of Chlorofluorocarbons (which were extensively used in the production of insulation panels in refrigerators and air-conditioners). How is the opportunity cost of this ban affected by the availability and cost of substitutes for Chlorofluorocarbons?

Answer 1

Opportunity cost of the ban depends heavily on the availability and cost of substitutes for chlorofluorocarbons. Indeed, in the absence or presence of a small number of substitutes prohibition opportunity cost would be very high, but, in contrast, if it is a lot of substitutes for the substance, the cost is low. Thus, the high price of substitutes opportunity cost is high and at low - low.