Asked by Charlease Jordan on Apr 30, 2024
Verified
The cost of an extra unit of oil in the United States in terms of coal given up is
A) 25.
B) 50.
C) 2.
D) 1/2.
Coal
A fossil fuel used primarily for electricity generation and steel production, composed mostly of carbon.
- Examine the impact of opportunity costs on trade and production choices.
Verified Answer
CC
Cheyanne ChurchMay 07, 2024
Final Answer :
D
Explanation :
The cost of an extra unit of oil in terms of coal given up can be calculated using the opportunity cost concept. From possibility A to B, the United States goes from 100 to 50 units of oil, a decrease of 50 units of oil, to increase coal production from 0 to 25 units, an increase of 25 units. Thus, the cost of an extra unit of oil is 25 units of coal given up for 50 units of oil, or 25/50 = 1/2.
Learning Objectives
- Examine the impact of opportunity costs on trade and production choices.