Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day.
-Refer to Table 3-21. Jamaica's opportunity cost of one cooler is
A)0.5 radios, and Norway's opportunity cost of one cooler is 0.125 radios.
B)0.5 radios, and Norway's opportunity cost of one cooler is 8 radios.
C)2 radios, and Norway's opportunity cost of one cooler is 0.125 radios.
D)2 radios, and Norway's opportunity cost of one cooler is 8 radios.

Question

Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. 
-Refer to Table 3-21. Jamaica's opportunity cost of one cooler is
A)0.5 radios, and Norway's opportunity cost of one cooler is 0.125 radios. 
B)0.5 radios, and Norway's opportunity cost of one cooler is 8 radios. 
C)2 radios, and Norway's opportunity cost of one cooler is 0.125 radios. 
D)2 radios, and Norway's opportunity cost of one cooler is 8 radios.

Quizplus · Accepted Answer

Opportunity cost is the value of the next best alternative forgone. For Jamaica, the opportunity cost of one cooler is 5 radios (10 radios/2 coolers). Therefore, the opportunity cost of one cooler for Jamaica is 0.5 radios (1 cooler/5 radios). For Norway, the opportunity cost of one cooler is 8 radios (40 radios/5 coolers). Therefore, the opportunity cost of one cooler for Norway is 0.125 radios (1 cooler/8 radios). Jamaica should produce coolers as their opportunity cost of one cooler is lower than Norway's, and Norway should produce radios as their opportunity cost of one cooler is lower than Jamaica's.

Table 3-21 Assume That Jamaica and Norway Can Switch Between Producing Coolers