Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.

-Refer to Table 3-2.Aruba's opportunity cost of one cooler is
A) 0.4 radio and Iceland's opportunity cost of one cooler is 0.25 radio.
B) 0.4 radio and Iceland's opportunity cost of one cooler is 4 radios.
C) 2.5 radios and Iceland's opportunity cost of one cooler is 0.25 radio.
D) 2.5 radios and Iceland's opportunity cost of one cooler is 4 radios.

Question

Table 3-2
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
 
-Refer to Table 3-2.Aruba's opportunity cost of one cooler is
A) 0.4 radio and Iceland's opportunity cost of one cooler is 0.25 radio. 
B) 0.4 radio and Iceland's opportunity cost of one cooler is 4 radios. 
C) 2.5 radios and Iceland's opportunity cost of one cooler is 0.25 radio. 
D) 2.5 radios and Iceland's opportunity cost of one cooler is 4 radios.

Quizplus · Accepted Answer

To calculate opportunity cost, we need to compare the production possibilities of two goods in each country. Aruba can produce either 10 coolers or 40 radios, which means the opportunity cost of one cooler is giving up 4 radios (40/10). Iceland can produce either 12 coolers or 48 radios, which means the opportunity cost of one cooler is giving up 4 radios (48/12). Therefore, Aruba's opportunity cost of one cooler is 0.4 radio and Iceland's opportunity cost of one cooler is 0.25 radio.

Table 3-2 Assume That Aruba and Iceland Can Switch Between Producing Coolers