Question

Use the following to answer questions 40-42: Table: The Production Possibilities for Tractors and Crude Oil Crude oil Country Tractors (thousands of barrels) United States 80 40 Mexico 60 180 40. Look at the table The Production Possibilities for Tractors and Crude Oil. In Mexico the opportunity cost of producing one tractor is thousand barrels of crude oil. A) 3 B) 1/2 C) 2 D) 3/4 E) 1/3 41. Look at the table The Production Possibilities for Tractors and Crude Oil. In the United States the opportunity cost of producing one thousand barrels of crude oil is tractors. A) 1/2 B) 3/4 C) 2/ 9 D ) 2 E) 4/3 42. Look at the table The Production Possibilities for Tractors and Crude Oil has (have) an absolute advantage in producing tractors. A) The United States Both the United States and Mexico B) Mexico )) Neither the United States nor Mexico

Answer 1

In Mexico, to produce 60 tractors, they have to give up 180 thousand barrels of Oil. This means to produce 1 tractor, he will have to give up 3 thousand barrels of oil. Therefore the opportunity cost is 3 thousand. option a)

To produce 40 thousand barrels of oil in US has to give up 80 tractors. To produce 1 thousand barrel they will have to give up 2 tractors. Therefore opportunity cost is 2. option d)

With the same amount of resources, US can make more tractors. Therefore US has an absolute advantage in producing tractors.