Question

10. What is the opportunity cost in daffodils to go from 0 tulips to 300 tulips? How does

Answer 1

Answer:

As the decrease in the tulip's quantity in the both cases is the same, hence the opportunity cost will also be the same required that the marginal cost remains constant.

Explanation:

Opportunity cost is the value lost in opting to alternative option. This means that if an ice cream costs me $10 then the opportunity cost of eating an ice cream would be $10 because I haven't enjoyed an alternative of an ice cream which would be worth $10. Likewise, if I am deciding to attend a party but I have previously purchased cinema tickets worth $50 then the opportunity cost of attending the party would be $50 and opportunity cost of watching movie would be the loss of entertainment at the party.

The opportunity cost of producing 0-300 tulips is $5 per tulip then it is more likely that the cost of producing 600-900 tulips will also be $5 per tulip.

Thus the opportunity cost here for each case will be:

Case1 0-300 Tulips: 300 Tulips * $5 per Unit = $1500

Case2 600-900 Tulips: 300 Tulips * $5 per Unit = $1500

But if the cost of producing first 300 units of tulips are different from the third 300 units of tulip then there will be of course a difference in opportunity cost.