Question

Suppose that there are 7 million workers in Mexico and that each of these workers can produce either 2 cars or 50 bushels of wheat in a year. bushels of wheat, and the opportunity cost of producing a_______ bushel of wheat in Mexico is ___________cars.

Answer 1

The employees in Mexico can either produce 2 cars or 50 bushels of wheat.

This means that the opportunity cost of producing 50 bushels of wheat is 2 cars.

For 1 bushel of wheat therefore;

= 2/50

= 0.04 cars

Opportunity cost of producing a car in Mexico will be;

= 50/2

= 25 bushels of wheat.

The opportunity cost of producing a car in Mexico is 25 bushels of wheat, and the opportunity cost of producing a bushel of wheat in Mexico is 0.04 cars.