Table 13.6
Production and
Consumption Production
Without Trade With Trade Denmark and Belize can produce both clocks and hats.Table 13.6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 13.6.Prior to trade, what was the opportunity cost to produce 1 clock in Belize?
A)1/6 of a hat
B)2/3 of a hat
C)1)5 hats
D)6 hats

Question

Table 13.6
Production and
Consumption Production
Without Trade With Trade  Denmark and Belize can produce both clocks and hats.Table 13.6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 13.6.Prior to trade, what was the opportunity cost to produce 1 clock in Belize?
A)1/6 of a hat 
B)2/3 of a hat 
C)1)5 hats 
D)6 hats

Quizplus · Accepted Answer

Prior to trade, Belize could produce 2 hats in exchange for 1 clock. Therefore, the opportunity cost to produce 1 clock in Belize is 2 hats.

Answer: Trade
 With trade, both countries can consume more of both goods than they could without trade. Belize gains from specializing in the production of clocks and trading with Denmark for hats, while Denmark gains from specializing in the production of hats and trading with Belize for clocks. This results in a higher overall level of production and consumption for both countries, making trade the better choice.

Table 13.6 Production and