Scenario: Consider two economies, Beta and Zeta. Each farmer in Beta can grow 1,000 pounds of apples or 500 pounds of oranges in a year. Each farmer in Zeta can grow 400 pounds of apples or 1,200 pounds of oranges in a year.
-Refer to the scenario above.The opportunity cost of producing 1 pound of oranges in Beta is ________.

Question

Quizplus · Accepted Answer

The opportunity cost of producing 1 pound of oranges in Beta is 2 pounds of apples (since each farmer can produce 500 pounds of oranges or 1,000 pounds of apples). Therefore, Beta has a comparative advantage in producing apples, while Zeta has a comparative advantage in producing oranges. The best choice(s) depends on the specific needs and preferences of each economy. If Beta needs more oranges, it can trade with Zeta by exporting apples and importing oranges, as it would give up less by doing so. Similarly, if Zeta needs more apples, it can trade with Beta by exporting oranges and importing apples, as it would give up less by doing so. By specializing in the production of goods in which they have a comparative advantage, both economies can benefit from trade and achieve a higher level of welfare than if they tried to produce everything on their own.

Scenario: Consider Two Economies, Beta and Zeta