Shown below are the production possibilities curves for two nations: the United

Question

Shown below are the production possibilities curves for two nations: the United States and Chile. Suppose these two nations do not currently engage in international trade or specialization, and suppose that points A and a show the combinations of wheat and copper they now produce and consume Chile United States 10 10 10 10 Copper (thousands of pounds) Copper (thousands of pounds) 1. What is the United States opportunity cost for wheat and copper-show your math work? 2. What is Chile's opportunity cost for wheat and copper -show your math work? 3. Could these two countries gain through specialization? If so, in what products should they each specialize in?

Explanation / Answer

Opportunity cost for wheat = maximum copper produced using all resources/, maximum wheat produced using all resources

1. U.S.

Opportunity cost for 1 ton of wheat = 2000/8000000 = 0.00025 pounds of copper

Opportunity cost for 1 pound of copper = 8000000/2000 = 4000 tons of wheat

2. Chile

Opportunity cost for 1 ton of wheat = 2000/4000000 = 0.0005 pounds of copper

Opportunity cost for 1 pound of copper = 4000000/2000 = 2000 tons of wheat

3.

Yes, there are gains to be reaped through specialization.

Countries should specialize in products where they have lower opportunity costs.

Therefore, Chile should specialize in wheat production while U.S. should specialize in copper production.

Related Questions

Navigate

• Browse (All)
• Browse S
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.