Figure 1-7 shows the production possibilities boundary for an economy that produces two goods-cotton and bananas.
FIGURE 1-7
Refer to Figure 1-7. A production possibilities boundary is shown for an economy that produces two goods-cotton and bananas, both measured in tonnes produced per year. Which of the following statements best describes the difference in opportunity costs that this economy faces at point A compared to point E?
◦ The opportunity cost of producing an extra tonne of bananas is much lower at point A than at point E.
◦ The opportunity cost is 500 tonnes of cotton at point A, compared to 1500 tonnes at point E.
◦ The opportunity cost of producing an extra tonne of bananas is the same at point A as at point E.
◦ The opportunity cost is 1500 tonnes of cotton at point A, compared to 500 tonnes at point E.
◦ The opportunity cost of producing an extra tonne of bananas is much higher at point A than at point E.