The table shows the combinations of wheat and cloth that an economy can produce when its resources are fully utilised:
| Wheat (units) | 0 | 5 | 10 | 15 |
| Cloth (units) | 30 | 20 | 10 | 0 |
What is the opportunity cost of producing one unit of wheat?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 2 units of cloth
Given:
0 units of wheat: 30 units of cloth
5 units of wheat: 20 units of cloth
The opportunity cost of wheat is the cloth given up for it.
Cloth given up for 5 units of wheat = 30 − 20 = 10 units
Cloth given up for 1 unit of wheat = 10 ÷ 5 = 2 units of cloth
Every step of 5 units of wheat costs the same 10 units of cloth, so the cost stays 2 units of cloth at every point.
Option (1) 0.5 unit of cloth — Incorrect. This divides the wrong way round (5 ÷ 10).
Option (3) 10 units of cloth — Incorrect. This is the cost of 5 units of wheat, not of one unit.
Option (4) 30 units of cloth — Incorrect. This is all the cloth the economy makes when it produces no wheat.
NCERT (2026-27): “Production Possibility Frontier … If more of the scarce resources are used in the production of corn, less resources are available for the production of cotton and vice versa. Therefore, if we want to have more of one of the goods, we will have less of the other good. Thus, there is always a cost of having a little more of one good in terms of the amount of the other good that has to be forgone. This is known as the opportunity cost of an additional unit of the goods.” |