The table shows some combinations of corn and cotton that an economy can produce when its resources are fully utilised:
| Possibility | A | B | C | D | E |
|---|---|---|---|---|---|
| Corn (units) | 0 | 1 | 2 | 3 | 4 |
| Cotton (units) | 10 | 9 | 7 | 4 | 0 |
What is the opportunity cost of producing the third unit of corn?
Answer & explanation
Correct answer: option 2
The correct answer is Option (2) → 3 units of cotton
Given:
Possibility C: 2 units of corn and 7 units of cotton
Possibility D: 3 units of corn and 4 units of cotton
The opportunity cost of the third unit of corn is the cotton given up to produce it.
Cotton given up = 7 − 4 = 3 units of cotton
7 units is the cotton left at C, not the cotton given up.
NCERT (2026-27): “Production Possibility Frontier If all the resources are used in the production of corn, the maximum amount of corn that can be produced is 4 units and if all resources are used in the production of cotton, at the most, 10 units of cotton can be produced. The economy can also produce 1 unit of corn and 9 units of cotton or 2 units of corn and 7 units of cotton or 3 units of corn and 4 units of cotton. There can be many other possibilities. …” “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.” |