Figure 2-9

Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-9.What is the opportunity cost of producing 1 bolt of cotton in Pakistan?

Question

Figure 2-9
  
Figure 2-9 shows the production possibilities frontiers for Pakistan and Indonesia. Each country produces two goods, cotton and cashews.
-Refer to Figure 2-9.What is the opportunity cost of producing 1 bolt of cotton in Pakistan?

Quizplus · Accepted Answer

To produce 1 bolt of cotton in Pakistan, the country must give up producing 5/8 of a pound of cashews. This represents the opportunity cost of producing cotton.

As for the best choice, it depends on the goals and preferences of each country. If Pakistan values producing cotton more than cashews, it should focus on producing more cotton and trade with Indonesia for cashews. Similarly, if Indonesia values producing cashews more than cotton, it should focus on producing more cashews and trade with Pakistan for cotton. The optimal allocation of resources depends on each country's comparative advantage in producing each good.

Figure 2-9 Figure 2-9 Shows the Production Possibilities Frontiers for Pakistan and Possibilities