Figure: Upperia's Production and Consumption (Figure: Upperia's Production and Consumption) The graph shows
Upperia's international trading pattern.Point P is production with trade,
And point C is consumption with trade.What is the international price of
Shoes (shirts/pair of shoes)?
A)125/80 shirts per unit of pair of shoes
B)4/3 shirts per unit of pair of shoes
C)5/4 shirts per unit of pair of shoes
D)3/4 shirt per unit of pair of shoes

Question

Figure: Upperia's Production and Consumption  (Figure: Upperia's Production and Consumption) The graph shows
Upperia's international trading pattern.Point P is production with trade,
And point C is consumption with trade.What is the international price of
Shoes (shirts/pair of shoes)?
A)125/80 shirts per unit of pair of shoes 
B)4/3 shirts per unit of pair of shoes 
C)5/4 shirts per unit of pair of shoes 
D)3/4 shirt per unit of pair of shoes

Quizplus · Accepted Answer

The international price of shoes (shirts/pair of shoes) can be found by calculating the slope of the production possibility frontier (PPF). From point P to point C, the PPF has a slope of -3/4, which means that Upperia is willing to give up 3/4 of a shirt to produce one more pair of shoes. Therefore, the international price of shoes (shirts/pair of shoes) is 4/3 shirts per unit of pair of shoes. This is only represented by option B.