Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below. The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______.

Question

Smith and Jones comprise a two-person economy. Their hourly rates of production are shown below.  The opportunity cost of making a calculator for Smith is ______ and for Jones it is ______.

Quizplus · Accepted Answer

In an hour, Smith can either make 10 computers or 100 calculators, so his opportunity cost of 1 calculator is 0.10 (= 10/100) computers. Jones can either make 120 calculators or 6 computers, so his opportunity cost of 1 calculator is 0.05 (= 6/120) computers.

Smith and Jones Comprise a Two-Person Economy