Assume that Aruba and Iceland can switch between producing coolers and producing

Question

Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.

Labor Hours

Needed to Make 1

Cooler

Radio

Aruba

4

10

Iceland

2

8

Refer to the Table Above. Aruba opportunity cost of one radio is

0.4 cooler and Iceland’s opportunity cost of one radio is 0.25 cooler

0.4 cooler and Iceland’s opportunity cost of one radio is 4 cooler

2.5 cooler and Iceland’s opportunity cost of one radio is 0.25 cooler

2.5 coolers and Iceland’s opportunity cost of one radio is 4 coolers

Labor Hours

Needed to Make 1

Cooler

Radio

Aruba

4

10

Iceland

2

8

Explanation / Answer

Solution: 2.5 coolers and Iceland’s opportunity cost of one radio is 4 coolers

Working: Cooler 10/ 4 =2.5 ; Radio = 8/2= 4

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