Question

Exhibit 33-4

Country 1		Country 2
Good A	Good B	Good A	Good B
250	0	75	0
200	10	60	15
150	20	45	30
100	30	30	45
50	40	15	60
0	50	0	75

Refer to Exhibit 33-4. The opportunity cost of one unit of good A is __________ for country 1 and __________ for country 2.

A. 20B; 15B

B. 0.2B; 1B

C. 0.5B; 15B

D. 5B; 1B

E. 40B; 15B

Refer to Exhibit 33-4. Country 1 has a comparative advantage in the production of __________, and country 2 has a comparative advantage in the production of __________.

A. good A; good B

B. both goods; neither good

C. good B; good A

D. neither good; both goods

E. neither good; neither good

Answer 1

1) ans is B

opportunity cost is the next best alternative forgone. It is the number of units of 2nd hood sacrificed to gain an additional unit of 1 good.

Opportunity cost of good A is 0.2B in country 1

Opportunity cost of good A is 1B in country 2.

2)Country 1 has comparative advantage in good A and country 2 in Good B because of lower opportunity cost.

ans is A