An economy shifts its production from 10 units of product A and 4 units of product B to 7 units of A and 5 units of B. What is the opportunity cost of producing the 5th unit of product B?

Explanation

The opportunity cost of the 5th unit of B is the amount of A forgone. Production of A decreased from 10 to 7 units, a loss of 3 units, to gain 1 additional unit of B. Therefore, the opportunity cost of the 5th B is 3 units of A.