Refer to the graph of the Production Possibilities Frontier (PPF). If an economy moves from point B to point C, what does the opportunity cost represent?

• A. The amount of one good that must be given up to produce more of the other good
• B. The total output produced at point C
• C. The difference in prices between point B and point C
• D. The increase in resources available to the economy

Answer: (A)

Verified step by step guidance

1. Understand that the Production Possibilities Frontier (PPF) illustrates the maximum possible output combinations of two goods that an economy can produce given its resources and technology.
2. Recognize that moving from point B to point C on the PPF means reallocating resources to produce more of one good and less of the other.
3. Recall that opportunity cost is defined as the amount of one good that must be sacrificed to produce an additional unit of the other good.
4. Identify that the opportunity cost when moving from point B to point C is the quantity of the good given up (reduced production) to increase the production of the other good.
5. Conclude that the opportunity cost does not represent total output, price differences, or resource increases, but specifically the trade-off between the two goods along the PPF.