Figure 2.13 Figure 2.13 shows the production possibilities frontiers for Pakistan and Indonesia.Each country produces two goods, cotton and cashews.
Alt text for Figure 2.13: In figure 2.13, 2 graphs, show the production possibilities frontiers for Pakistan and Indonesia.
Long description for Figure 2.13: The graph on the left represents Pakistan.The x-axis is labelled, cotton in bolts, and the amount 240 marked.The y-axis is labelled, cashews in pounds, and the amount 150 is marked .A slanted line is drawn from point 150 on the y-axis to point 240 on the x-axis.The graph on the right represents Indonesia.The x-axis is labelled, cotton, in bolts, and the amount 320 is marked.The y-axis is labelled, cashews, in pounds, and the amount 120 marked.A slanted line is drawn from point 120 on the y-axis to point 320 on the x-axis.
-Refer to Figure 2.13.What is the opportunity cost of producing 1 pound of cashews in Indonesia?
A)3/8 of a bolt of cotton
B)5/8 of a bolt of cotton
C)2 2/3 bolts of cotton
D)320 bolts of cotton

Question

Figure 2.13  Figure 2.13 shows the production possibilities frontiers for Pakistan and Indonesia.Each country produces two goods, cotton and cashews.
Alt text for Figure 2.13: In figure 2.13, 2 graphs, show the production possibilities frontiers for Pakistan and Indonesia.
Long description for Figure 2.13: The graph on the left represents Pakistan.The x-axis is labelled, cotton in bolts, and the amount 240 marked.The y-axis is labelled, cashews in pounds, and the amount 150 is marked .A slanted line is drawn from point 150 on the y-axis to point 240 on the x-axis.The graph on the right represents Indonesia.The x-axis is labelled, cotton, in bolts, and the amount 320 is marked.The y-axis is labelled, cashews, in pounds, and the amount 120 marked.A slanted line is drawn from point 120 on the y-axis to point 320 on the x-axis.
-Refer to Figure 2.13.What is the opportunity cost of producing 1 pound of cashews in Indonesia?
A)3/8 of a bolt of cotton 
B)5/8 of a bolt of cotton 
C)2 2/3 bolts of cotton 
D)320 bolts of cotton

Quizplus · Accepted Answer

For Indonesia, the opportunity cost of producing 1 pound of cashews is the slope of the production possibilities frontier, which is (320-120)/(0-240) = 5/8 of a bolt of cotton. Therefore, it is most efficient for Indonesia to produce more cashews and less cotton, as the opportunity cost of producing cashews is lower. Pakistan, on the other hand, has a higher opportunity cost of producing cashews, and therefore should focus more on producing cotton. The best choice for each country depends on their comparative advantage, which is determined by their opportunity cost of producing each good.

Figure 213 Figure 2