In one day Kenya can produce either 40 tonnes of tea or 20 tonnes of coffee. What is the opportunity cost of one tonne of coffee?
Answer and explanation
Correct answer: A. 2 tonnes of tea
- Step 1: Giving up 40 tonnes of tea gains 20 tonnes of coffee. Step 2. One tonne of coffee costs 40/20 = 2 tonnes of tea. Answer: 2 tonnes of tea. Why not the others: 0.5 tonne of tea: That is the opportunity cost of one tonne of tea in coffee. 20 tonnes of tea: That is the amount of coffee produced. 40 tonnes of tea: That is the total tea produced.
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