Refer to the graph of the Production Possibilities Frontier (PPF). If moving from point B to point C results in producing 10 more units of good X and 5 fewer units of good Y, what is the opportunity cost of this move?

• A. 15 units of good Y
• B. There is no opportunity cost
• C. 5 units of good Y
• D. 10 units of good X

Answer: (C)

Verified step by step guidance

1. Understand that the opportunity cost of moving from one point to another on the Production Possibilities Frontier (PPF) is the amount of one good that must be given up to produce more of the other good.
2. Identify the change in quantities when moving from point B to point C: good X increases by 10 units, and good Y decreases by 5 units.
3. Recognize that the opportunity cost of producing more of good X is the amount of good Y that is sacrificed.
4. Express the opportunity cost mathematically as: \(\text{Opportunity Cost of good X} = \frac{\text{Decrease in good Y}}{\text{Increase in good X}}\).
5. Substitute the values into the formula: \(\frac{5}{10}\), which represents the units of good Y given up per unit of good X gained.