Table 18-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 18-6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 18-6.Prior to trade,what was the opportunity cost to produce 1 clock in Denmark?

Question

Table 18-6
Production and
Consumption Production
Without Trade With Trade
  Denmark and Belize can produce both clocks and hats. Table 18-6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 18-6.Prior to trade,what was the opportunity cost to produce 1 clock in Denmark?

Quizplus · Accepted Answer

Without trade, Denmark can produce 3 hats or 18/5 clocks. So the opportunity cost of producing 1 clock in Denmark is: 3 hats / (18/5 clocks) = 5/2 hats per clock or 2/5 clock per hat.

Answer: Trade Clocks for Hats with Belize
 With trade, Denmark can exchange clocks for hats with Belize, as Belize has a comparative advantage in producing hats. By specializing in producing clocks and trading for hats, Denmark can increase its overall consumption of goods.

Table 18-6 Production and