Table 7-6
Production and
Consumption Production
Without Trade With Trade
Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Morocco?
A)1/2 of a belt
B)4/5 of a belt
C)1.25 belts
D)2 belts

Question

Table 7-6
Production and
Consumption Production
Without Trade With Trade
  Estonia and Morocco can produce both swords and belts.Table 7-6 shows the production and consumption quantities without trade,and the production numbers with trade.
-Refer to Table 7-6.Prior to trade,what was the opportunity cost to produce 1 sword in Morocco?
A)1/2 of a belt 
B)4/5 of a belt 
C)1.25 belts 
D)2 belts

Quizplus · Accepted Answer

Prior to trade, Morocco can produce 4 belts or 1 sword. Therefore, the opportunity cost of producing 1 sword in Morocco is giving up the production of 4 belts, which is 4/1 or 4 belts.

Answer: Trade 
 With trade, Estonia can specialize in producing swords and export them to Morocco in exchange for belts. As a result, both countries can consume more swords and belts than they could produce domestically without trade. Therefore, trade benefits both countries by increasing their combined consumption beyond their production possibilities.

Table 7-6 Production and