Question

Suppose that Croatia and Liechtenstein both produce boots and broccoli. Croatia's opportunity cost of producing a bushel of broccoli is 5 pairs of boots while Liechtenstein's opportunity cost of producing a bushel of broccoli is 11 pairs of boots. What is the opportunity cost of producing a pair of boots for Croatia?

1) 1/5 bushels of broccoli
2) 1/11 bushels of broccoli
3) 5/1 bushels of broccoli
4) 11/1 bushels of broccoli

Answer 1

The opportunity cost of producing a pair of boots for Croatia is 1/5 bushels of broccoli. This implies a reciprocal relationship between the cost of producing boots and the cost of producing broccoli.

Step-by-step explanation:

The question pertains to the calculation of opportunity cost in producing goods. The scenario involves Croatia and Liechtenstein, both of which produce boots and broccoli. According to the given information, Croatia has an opportunity cost of 5 pairs of boots to produce a bushel of broccoli. Therefore, to calculate the opportunity cost of producing a pair of boots in Croatia, we simply take the reciprocal of this ratio, which will yield the opportunity cost in terms of broccoli.

The answer to the student's question is option 1: 1/5 bushels of broccoli. This means for every pair of boots that Croatia decides to produce, they give up the opportunity to produce 1/5 of a bushel of broccoli. Since the question relates to opportunity costs and gains from trade, we can infer that countries would specialize in goods where they have a lower opportunity cost, allowing for advantageous trade between them.