Exhibit 19-1 Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a coconut in Beta?

Question

Exhibit 19-1  Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.What is the opportunity cost of a coconut in Beta?

Quizplus · Accepted Answer

To calculate the opportunity cost of a coconut in Beta, we need to look at the slope of the PPF. The slope of the PPF represents the opportunity cost of producing one good in terms of the other. The slope of the PPF for Beta is -2, which means that producing an additional coconut requires giving up 2 fish. Therefore, the opportunity cost of a coconut in Beta is 2 fish.

The best choice for Beta would be to specialize in the production of fish and trade with Lambda, which has a lower opportunity cost for producing coconuts. Specifically, Beta should produce at point A, where they are producing 12 fish and no coconuts, and trade with Lambda for coconuts. Lambda should produce at point C, where they are producing 2 coconuts and 6 fish, and trade with Beta for fish. Through trade, both countries can consume outside of their respective PPFs and achieve a higher level of consumption than they could have through isolation.

Exhibit 19-1 Exhibit 19-1 Shows the Production Possibilities Frontiers