Figure: PPF Mexico & United States Mexico U.S Shirts Shirts 24 12 2 Computers 24

Question

Figure: PPF Mexico & United States Mexico U.S Shirts Shirts 24 12 2 Computers 24 Computers Reference: Ref 2-4 (Figure: PPF Mexico & United States) Use the figure in which both Mexico and the United States each have 24 units of labor. The opportunity costs of producing one shirt are A, one computer for both Mexico and the United States. B. 1/6 of a computer for Mexico and one computer for United States. C. 1/6 of computer for both Mexico and the United States. D. one computer for Mexico and 1/6 of a computer for the United States.

Explanation / Answer

Ans:

Option B

1/6 of a computer for Mexico and one computer for United States.

Computation of opportunity cost of producing 1 shirt

For mexico to produce 1 unit of shirt i.e(12/12),it has an opportunity cost of 1/6 of a computer i.e(2/12).

For United states to produce 1 unit of shirt i.e(24/24),it has an opportunity cost of 1 computer i.e(24/24).

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