An economy operates along its production possibility frontier (PPFPPFPPF) represented by the equation M+2F=120M + 2F = 120M+2F=120, where M M\,M is agricultural machinery and F F\,F is consumable foodstuffs. The diagram below illustrates a reallocation of resources from point A to point B.
Which of the following statements correctly identifies the fundamental economic concept demonstrated by this movement and calculates its exact value?
The division of labour; the opportunity cost of increasing foodstuff production is 101010 units of foodstuffs.
The basic economic problem of scarcity; the opportunity cost of producing 101010 additional units of foodstuffs is 202020 units of machinery.
Diseconomies of scale; the opportunity cost of increasing machinery production is 222 units of foodstuffs per unit of machinery.
Allocative inefficiency; the opportunity cost of increasing foodstuff production is 404040 units of machinery.
