Chile and Argentina each produce jellybeans and peanut butter, using labor as their only resource. Each country has 1,000 hours of labor. In Chile, an hour produces a pound of jellybeans and 2 hours produce a pound of peanut butter. In Argentina, an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter. When they do not trade with each other, Chile consumes 600 pounds of jellybeans and 200 pounds of peanut butter, and Argentina consumes 400 pounds of jellybeans and 200 pounds of peanut butter. What is the opportunity cost of a pound of peanut butter in Chile?

Question

Quizplus · Accepted Answer

In Chile, it takes 2 hours to produce a pound of peanut butter and 1 hour to produce a pound of jellybeans. Therefore, the opportunity cost of producing 1 pound of peanut butter is the 2 pounds of jellybeans that could have been produced with the same amount of labor.

Chile and Argentina Each Produce Jellybeans and Peanut Butter, Using