Alpha can produce 40 units of coffee or 8 units of cashew nuts. Beta can produce 6 units of coffee or 6 units of nuts. Which statement is accurate with regard to the opportunity cost of production? Question 17 options:

Beta's opportunity cost of producing 1 unit of nuts is 8 units of coffee.

Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee.

Alpha's opportunity cost of producing 1 unit of coffee is 8 units of nuts.

The correct answer is Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee.

Explanation:

In economic theory, the opportunity cost refers to the value of the second best alternative option, which the decision maker let go when choosing the first option.

In the example, Alpha and Beta must choose between different output combinations of two goods (graphically represented by the production possibility frontier).

In order to produce 1 unit of cashew nuts, Alpha must let go the possibility of producing 5 units of coffee, that means that it produces either 1 cashew nut or 5 units of coffee. This is the ratio 40:8, which is equal to 5:1

Beta must let go 1 unit of coffee if he wants to produce 1 unit of cashew nuts. The ratio is thus 1:1 which is the same as 6:6.

Alpha's opportunity cost of producing 1 unit of cashew nuts is 5 units of coffee.

Explanation:

Opportunity cost - The cost of the next best alternative use of money, time, or resources when one choice is made rather than another