For each watch Denmark produces, it gives up the opportunity to make 50pounds of cheese.Germany can produce one watch for every 100 pounds ofcheese it produces.Which of the following is true concerning productionpossibilities curves in both countries?

Question

Quizplus · Accepted Answer

Since Denmark gives up 50 pounds of cheese for each watch produced, its opportunity cost of producing watches is 1/50 or 0.02 units of cheese per unit of watches. Germany, on the other hand, has an opportunity cost of 1/100 or 0.01 units of cheese per unit of watches. Therefore, Germany's production possibilities frontier will have a steeper slope (showing the trade-off between watches and cheese) compared to Denmark's production possibilities frontier.

For Each Watch Denmark Produces, It Gives Up the Opportunity