The table given below represents the output per hour of cookies and chilies in Ohio and Iowa.
Table 2.4

-Refer to Table 2.4.If trade were to occur,what would be the least amount Ohio would be willing to accept for 1 cookie?

Question

The table given below represents the output per hour of cookies and chilies in Ohio and Iowa. 
Table 2.4

-Refer to Table 2.4.If trade were to occur,what would be the least amount Ohio would be willing to accept for 1 cookie?

Quizplus · Accepted Answer

To determine the opportunity cost of 1 cookie in Ohio, we need to look at the tradeoff between cookies and chilies in Ohio. Ohio can produce either 4 cookies or 1 chili in an hour. Therefore, the opportunity cost of 1 cookie in terms of chili is 1 chili/4 cookies = 0.25 chili per cookie. Thus, Ohio would be willing to accept a minimum of 4 chilies for 1 cookie because that is the point at which the opportunity cost of producing a cookie (i.e. giving up the production of 4 chilies) is equal to the amount of chili they would receive. Any offer lower than 4 chilies would not be sufficient compensation for the loss of 4 chilies in production. Therefore, the best choice is D.

The Table Given Below Represents the Output Per Hour of Cookies