Suppose that the Beltrand family owns a farm near San Angelo, Texas. Three options exist for how to best use the farm:

Question

Option 1: Raise lambs and earn a profit of $425,000. Production expenses are $200,000.
Option 2: Raise cattle and earn a profit of $475,000. Production expenses are $400,000.
Option 3: Grow cotton and earn a profit of $600,000. Production expenses are $300,000.

Which option should the Beltrand family undertake and what is the opportunity cost in this
decision?
A) Option 3, $475,000
B) Option 1, $600,000
C) Option 2, $425,000
D) None of the above

Answer 1

A) Option 3, $475,000