Table 2.6

Table 2.6 shows the number of labour hours required to produce a digital camera and a kilo of wheat in China and South Korea.
-Refer to Table 2.6. What is South Korea's opportunity cost of producing one digital camera?
A)0.05 kilos of wheat
B)20 kilos of wheat
C)25 kilos of wheat
D)60 kilos of wheat

Question

Table 2.6
  
Table 2.6 shows the number of labour hours required to produce a digital camera and a kilo of wheat in China and South Korea.
-Refer to Table 2.6. What is South Korea's opportunity cost of producing one digital camera?
A)0.05 kilos of wheat 
B)20 kilos of wheat 
C)25 kilos of wheat 
D)60 kilos of wheat

Quizplus · Accepted Answer

South Korea's opportunity cost of producing one digital camera is 25 kilos of wheat (since it takes 45 labour hours to produce one camera in South Korea and 180 labour hours to produce a kilo of wheat, therefore 45/180 = 0.25, and the opportunity cost is the reciprocal, which is 1/0.25 = 4, meaning 4 kilos of wheat per camera). In this case, China has a lower opportunity cost, as it takes 1.5 kilos of wheat for China to produce one camera (since it takes 30 labour hours to produce one camera in China and 20 labour hours to produce a kilo of wheat, therefore 30/20 = 1.5, and the opportunity cost is the reciprocal, which is 1/1.5 = 0.67, meaning 0.67 kilos of wheat per camera). Therefore, China has a comparative advantage in producing cameras, while South Korea has a comparative advantage in producing wheat.

Table 2.6 Table 2.6 Shows the Number of Labour Hours Required to of Labour