Table 7-6
Output per hour Production and Production
of work Consumption without Trade with Trade
Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 7-6 shows the output per hour of work,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 belt in Morocco?
A)1/2 of a sword
B)1 sword
C)1.5 swords
D)2 swords

Question

Table 7-6
Output per hour Production and Production
of work Consumption without Trade with Trade
  Estonia and Morocco can produce both swords and belts.Each country has a total of 40 available labor hours for the production of swords and belts.Table 7-6 shows the output per hour of work,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 belt in Morocco?
A)1/2 of a sword 
B)1 sword 
C)1.5 swords 
D)2 swords

Quizplus · Accepted Answer

Prior to trade, Morocco can either produce 2 belts or 1 sword with its available 40 labor hours. Therefore, the opportunity cost of producing 1 belt in Morocco is 1 sword.

With trade, both countries can specialize in producing the good they have a comparative advantage in, which is determined by the lower opportunity cost. Estonia has a lower opportunity cost in producing swords (1 belt = 1/2 sword) and Morocco has a lower opportunity cost in producing belts (1 sword = 2 belts). Therefore, Estonia should specialize in producing swords and Morocco should specialize in producing belts. With specialization and trade, both countries can consume more of both goods than they could produce on their own, resulting in a win-win outcome.

Table 7-6 Output Per Hour Production and Production