If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. $\begin{array} { | c | c | c | }
\hline\text { Country } & \begin{array} { c }
\text { Rubber } \
\text { Bands }
\end{array} & \text { Paper clips } \
\hline \mathbf { A } & 40 & 80 \
\hline \mathbf { B } & 10 & 40 \
\hline
\end{array}$ In country A the opportunity cost of 1 paper clip is

Question

If countries A and B produce only either rubber bands or paper clips, their maximum outputs are shown in the accompanying production possibilities schedules. $\begin{array} { | c | c | c | } 
\hline\text { Country } & \begin{array} { c } 
\text { Rubber } \
\text { Bands }
\end{array} & \text { Paper clips } \
\hline \mathbf { A } & 40 & 80 \
\hline  \mathbf  { B } & 10 & 40 \
\hline
\end{array}$ In country A the opportunity cost of 1 paper clip is

Quizplus · Accepted Answer

To calculate the opportunity cost of 1 paper clip in country A, we need to look at the slope of the production possibilities curve for rubber bands and paper clips. The slope of the curve represents the amount of rubber bands that need to be given up to produce an additional unit of paper clips.
In country A, the maximum output of rubber bands is 40 and the maximum output of paper clips is 80. Therefore, the slope of the curve is
$$\frac{80-0}{0-40}=-2$$
This means that to produce an additional unit of paper clip, 2 rubber bands need to be given up. So the opportunity cost of 1 paper clip is 2 rubber bands, or 1/2 rubber band per paper clip. Thus, the correct choice is C.

If Countries a and B Produce Only Either Rubber Bands