A farmer has to decide whether to allocate more land to growing corn or wheat. If he chooses to grow more corn, he must reduce the wheat production. Which of the following concepts best describes this situation?

In this situation, the concept of opportunity cost is very important. Opportunity cost refers to what the farmer gives up when he chooses to grow more of one crop instead of another. If he decides to use more land for corn, he has to reduce the land used for wheat, meaning he loses the potential wheat production he could have had. This is also related to the Production Possibility Curve (PPC), which shows the trade-offs between two goods that can be produced. For example, if the farmer uses 10 acres for corn instead of wheat, the opportunity cost is the amount of wheat he could have grown on those 10 acres.