Question

In the US 1 unit of food is produced in 1h while 1 unit of clothing costs 2h to make. In EU 3h of labor for food and 4h of labor for clothes. What are both countries' opportunity costs of producing food? A. The US gives up 2 units of clothing to produce 1 unit of food.

B. The US gives up 1 unit of clothing to produce 2 units of food.
C. The EU gives up 4 units of clothing to produce 1 unit of food.
D. The EU gives up 3 units of clothing to produce 1 unit of food.

Answer 1

The correct answer to the student's question about the opportunity cost of producing food is B. The US gives up 1 unit of clothing to produce 2 units of food.

Step-by-step explanation:

In the context of opportunity costs in production, when the US produces 1 unit of food, it gives up the opportunity to produce clothing. Since producing 1 unit of clothing costs 2 hours, the US could have produced 0.5 units of clothing in the time taken to produce 1 unit of food (1 hour). Similarly, for the EU, producing 1 unit of food takes 3 hours; it could have produced 0.75 units of clothing in that time (since 1 unit of clothing takes 4 hours there). Therefore, the opportunity costs of producing food are different for the US and EU.

This means that the correct answer is B. The US gives up 1 unit of clothing to produce 2 units of food. A is incorrect because the US gives up 0.5 units of clothing per unit of food, not 2. C and D pertain to the EU and are therefore not applicable to the US's opportunity cost for producing food. However, regarding the EU, neither C nor D is correct, since they don't reflect the proper conversion of the EU's labor hours into units of clothing.