Scenario 4-2: Production of Wheat and Toys Below is information regarding Countr

Question

Scenario 4-2: Production of Wheat and Toys Below is information regarding Countries A and B's production of two goods, wheat and toys.

Wheat

Toys

Country A

50

100

Country B

25

75

Each country has a linear production possibility curve with respect to their production of the two goods. The totals in each column represent the total number of units each country could produce if it used all of its resources to produce the good.

____ 7. (Scenario 4-2: Production of Wheat and Toys) The opportunity cost of producing a unit of wheat in Country B is:

a. 75 toys

b. 3 toys

c. 25 wheat

d. 1/3 wheat

e. 1/3 toys

Wheat

Toys

Country A

50

100

Country B

25

75

Explanation / Answer

7.

Correct Answer:

B. 3 toys

Working note:

In country B,

The opportunity cost of producing a unit of wheat = (75/25) units of toys

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