If a farmer produces wheat, which fetches $200 per quintal, instead of producing rice which would have fetched $180 per quintal and gram $160 per quintal. What is the opportunity cost of the farmer of producing wheat?
Answer & explanation
Correct answer: option 2
The correct answer is Option 2: $180
Opportunity cost is the value of the next best alternative foregone when making a choice.
- The farmer chooses to produce wheat ($200 per quintal).
- The other two options were:
- Rice → $180 per quintal
- Gram → $160 per quintal
Since rice would have fetched the highest price among the alternatives, the best alternative foregone is rice at $180 per quintal.