Assume the MPL_c = 2 cars and the MPL_b = 5 boats. There are 150 workers in this hypothetical economy. What is the maximum number of boats that can be produced? A) 30 B) 300 C) 750 D) 150

Question

Quizplus · Accepted Answer

We need to use the concept of opportunity cost and comparative advantage here. MPL_c can produce either 2 cars or 0.4 boats (since 1 car = 0.2 boats) while MPL_b can produce either 5 boats or 25 cars (since 1 boat = 5 cars). Now, let's assume that all 150 workers are employed in MPL_c to produce cars. They can produce a maximum of 2 cars per worker, which amounts to 150 * 2 = 300 cars in total. However, we know that 1 car = 0.2 boats, which means they can produce a maximum of 60 boats (300 * 0.2) with all their resources. On the other hand, if all 150 workers are employed in MPL_b to produce boats, they can produce a maximum of 5 boats per worker, which amounts to 150 * 5 = 750 boats in total. Therefore, the maximum number of boats that can be produced is 750, which means choice C is the correct answer.

Assume the MPLc = 2 Cars and the MPLb =

Assume the MPL_c = 2 Cars and the MPL_b =