sUPPOSE sOUTH kOREA CAN PRODUCE 100 COMPUTER CHIPS WITH 10 HOURS OF LABOR INPUT

Question

sUPPOSE sOUTH kOREA CAN PRODUCE 100 COMPUTER CHIPS WITH 10 HOURS OF LABOR INPUT AND 50 BED LINENS WITH 6 HOURS OF LABOR INPUT. THE US CAN PRODUCE 100 COMPUTER CHIPS IN 8 HOURS OF LABOR INPUT AND 50 BED LINENS WITH 4 HOURS OF LABOR INPUT.

1. WHAT IS THE OPPORTUNITY COST OF PRODUCING 100 COMPUTER CHIPS IN SOUTH KOREA?

2. WHAT IS THE OPPORTUNITY COST OF PRODUCING 50 BED LINENS FOR SOUTH KOREA?

3. WHAT IS THE OPPORTUNITY COST OF PRODUCING 100 COMPUTER CHIPS FOR THE US?

4. WHAT IS  THE OPPORTUNITY COST OF PRODUCING 50 BED LINENS FOR THE US?

USING COMPARATIVE ADVANTAGE, WHICH COUNTRY SHOULD IMPORT BED LINENS?

WHY?

Explanation / Answer

Hi,

Please find the answer as follows:

Part 1:

Opportunity Cost Of Producing 100 Computer Chips In South Korea = 100*50/6 = 83.33 Beds

Part 2:

Opportunity Cost Of Producing 50 Bed Linens In South Korea = 50*1/.833 = 60.02 or 60 Beds

Part 3:

Opportunity Cost Of Producing 50 Bed Linens for the US = 100*1 = 100 beds

Part 4:

Opportunity cost of producing 50 bed linens for the US = 50 Chips

Part 5:

South Korea will import bed linens fron US.

Thanks.

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