Question

Suppose that a worker in Country A can make either 10 iPods or 5 tablets each year. Country A has 100 workers. Suppose a worker in Country B can make either 2 iPods or 10 tablets each year. Country B has 200 workers. Suppose Country B's population of workers increased to 600. We can say:

A) Country B will experience a decrease in opportunity cost for tablets.
B) Country A will experience an increase in opportunity cost for tablets.
C) Country B will have a lower opportunity cost for tablets.
D) Country A will have a lower opportunity cost for iPods.

Answer 1

Option C is correct, since even after the increase of Country B's workers to 600, its opportunity cost for tablets remains 0.2 iPods, indicating a lower opportunity cost for tablets compared to Country A.

Step-by-step explanation:

Given the productivities for workers in Countries A and B and considering Country B's increase in the number of workers, which statement is correct about the opportunity costs?

In Country A, a worker can make either 10 iPods or 5 tablets each year. This implies that the opportunity cost of producing one tablet is 2 iPods (since making 5 tablets sacrifices the production of 10 iPods). Country A has no change in its workforce, so its opportunity costs remain the same.

In Country B, initially with 200 workers, a worker can make either 2 iPods or 10 tablets each year, which means the opportunity cost of making one tablet is 0.2 iPods. With the increase in the workforce to 600 workers, the production possibilities will certainly increase; however, without a change in the trade-offs of production, Country B's opportunity cost for tablets remains the same, not decreasing or increasing. Therefore, the correct statement is that Country B will have a lower opportunity cost for tablets than Country A, making option C the correct choice.