Tetovia is a small country in central Europe. It can produce either wine at a...
Question:Tetovia is a small country in central Europe. It can produce either wine at a cost of $65 and revenue of $110 per unit or watches that cost $150 and generate $215 profit per unit. What is the opportunity cost of producing wines?Production:In economics, production is the method used by a person or any other entity to transform raw material into a final product that can be consumed by buyers from the market at its specific price level.
Answer and Explanation:We know that the opportunity cost is the sacrifice that a person makes while choosing one alternative over another.The opportunity cost of producing wines is the profit that can be made from producing watches instead. Watches produce $215 in profit per unit, but since the profit from producing a unit of wine is $110 - $65 = $45 the opportunity cost foregone is the difference. $215 - $45 = $170 per unit.
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