For a country in autarky,the opportunity cost of the good on the horizontal axis is the same as
A)the relative price of the good on the vertical axis.
B)the relative price of the good on the horizontal axis.
C)the opportunity cost of the good on the vertical axis.
D)Both A and C.
E)None of the above.

Question

Quizplus · Accepted Answer

In autarky, a country has to produce everything domestically and it has limited resources. Therefore, the opportunity cost of producing one good is the amount of the other good that the country could have produced instead with the same resources. This means that the opportunity cost of the good on the horizontal axis is the amount of the good on the vertical axis that the country has to give up producing. Therefore, the relative price of the good on the vertical axis is the same as the opportunity cost of the good on the horizontal axis. Choice B is the correct answer.

For a Country in Autarky,the Opportunity Cost of the Good