Use the following scenario to answer the next ten questions: natasha can produce either 5,000 pounds of cheese or 20 houses per year. jameson can produce either 5,000 pounds of cheese or 10 houses per year. jameson’s opportunity cost of producing one pound of cheese is house(s).

Jameson’s opportunity cost of producing one pound of cheese is 0,002 house(s).

Explanation:

Opportunity costs represent the benefits an individual, investor or business misses out on when choosing one alternative over another. Resources are limited, therefore the decision to make a quantity of product A limits the amount of producing product B.

In this exercise, Jameson has the resources to produce 5000 pounds of cheese or 10 houses per year or a combination of both.

To calculate the opportunity cost you need to determine how much of a house is 1 pound of cheese.

Opportunity cost= 10house/5000pounds= 0,002

So to produce 1 pound of cheese you need 0,002 of a house.

0.002 house

Explanation: Decisions are made you use one thing or material or resource in place of another. In other words, one resource is forgone in place of another. This is usually due to limited resource availability which leads to opportunity costs — The cost of an opportunity forgone (and the loss of the benefits that could be received from that opportunity); the most valuable forgone alternative.

Your sole focus should be on Jameson since he is the only one whose opportunity cost was mentioned.

In producing 5000 pounds of cheese he would be forgoing the 10 houses he could have made and vice versa.

Now, to produce a pound of cheese, the forgone opportunity (house) is given by total houses divided by total pounds of cheese:

10/5000 = 0.002 house.

Therefore, in producing 1 pound of cheese, Jameson has forgone the 0.002 house alternative he could have produced.