Opportunity Cost? How do you solve this problem?

Question

Suppose that a farmer has land that can produce 20 bushels of corn per acre or 10 bushels of wheat per acre. She currently is producing 100 bushels of corn and 100 bushels of wheat. What is the opportunity cost to the farmer, measured in bushels of corn, of producing an additional 10 bushels of wheat?

Answer 1

A given area of land can produce twice as much corn as wheat. So to produce 10 additional bushels of wheat will require the conversion of an amount of land that could produce 20 bushels of corn. So the opportunity cost is 20 bushels of corn.

Answer 2

draw a line graph with bushels of wheat on one side and bushels of corn on the other axis. she has a total of 15 acres (100 / 10 + 100 / 20). therefore, she can produce a total of 300 bushels of corn where if she produces no wheat or 150 bushels of wheat if she produces no corn. at any point on that production possibilities frontier (PPF) you can find her maximum possible output. for every bushel of corn she produces, it costs her a half of a bushel of wheat. for every bushel of wheat she produces, it costs her 2 bushels of corn.

Answer 3

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