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12 June, 17:44

If the tiny nation of Lorland devotes all its resources to strawberries, it can produce 16 strawberries per day. If it devotes all its resources to balloons, it can produce 80 balloons per day. These are the only goods that Lorland can produce. What is the opportunity cost of 1 balloon in Lorland?

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  1. 12 June, 18:10
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    So, the opportunity cost of 1 balloon in Lorland is = 0.20 strawberries.

    Explanation

    The opportunity cost of 1 balloon refers to the number of strawberries Lorland needs to sacrifice in order to produce 1 balloon. From the given information, we know that Lorland needs to sacrifice 16 strawberries for 80 ballons.

    So, for 1 balloon, it needs to sacrifice 16/80 = 1/5 = 0.20 strawberries.
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