Candles Soap

Bryce 150 450

Tina 200 450

Bryce and Tina are artisans who produce homemade candles and soap.

Select the statement that accurately interprets the data in the table.

a. Tina has a greater opportunity cost than Bryce for making candles.

b. Bryce's opportunity cost for making candles is less than Tina's.

c. Bryce has a greater opportunity cost than Tina for making candles.

d. Bryce's opportunity cost for making candles and making soap are both greater than Tina's.

Answer: Option B

Explanation:

opportunity cost in simple term is described as the cost of missing out on an option over choosing another option.

In the above case Bryce uses 150 to make candle and Tina uses 200, if an investor tries to choose between Bryce and Tina to produce candles, Choosing Tina would lead to higher opportunity cost for the investor as it would cost the investor more to choose Tina over Bryce.

The most appropriate answer is Bryce's opportunity cost for making candles is less than Tina's.

Answer: Option "C" - Bryce has a greater opportunity cost than Tina for making candles

Explanation:

Opportunity cost is the term given to the benefit or profit or value that must be forgone or given up before one course of action can be chosen or something else can be achieved or acquired. The idea and concept of opportunity cost is essential as it reminds one to thoroughly weigh all alternatives properly before taking a final stand or decision.

For instance, let's assume that I am in possession of €14,000 and decided to invest the money in an investment that will probably yield a return of 9%. Then, suffice it to say that there's another investment that has the capacity of yielding a return of 13% that I could have opted for. This implies that the opportunity cost of this decision that I just made is the difference of 4% between my alternatives. Opportunity cost mustn't have to do with money always. Sometimes, it is about alternative uses of other things like time.

Now, in Bryce's / Tina's situation, the opportunity cost is the difference between the units of alternatives produced. In Bryce's case specifically, His opportunity cost for making candles is 450 - 150 = 300 units (the benefit or units of candles he gave up in order to produce more soaps).

In Tina's situation, her opportunity cost for making candles is 450 - 200 = 250 units (the forgone candle units in order to accommodate increment of soap units)

Considering that 300 units is greater than 250 units, it will be concluded that Bryce has a greater opportunity cost than Tina for making candles.