Question

Exhibit 34-1 Country A Country B Good X Good Y Good X Good Y 90 0 30 0 60 30 20 20 30 60 10 40 0 90 0 60 Refer to Exhibit 34-1. The opportunity cost of one unit of X in country B is a. 0.33 units of Y. b. 20 units of Y. c. 2 units of Y. d. 1 unit of Y.

Answer 1

Answer:

c. 2 units of Y.

Explanation:

Country A                                   Country B

Good X        Good Y                  Good X        Good Y

90                 0                            30                 0

60                30                           20                20

30                60                           10                 40

0                  90                           0                   60

Country B's opportunity cost to produce 10 units of X is 20 units of Y, therefore the opportunity cost to produce 1 unit of X is 2 units of Y (= 20 / 10 = 2).

Opportunity costs are the extra costs or lost benefits from choosing one activity or investment over another alternative. In this case, if Country B decides to produce 10 units of X, it will lose 20 units of Y.