Suppose by using the same amounts of resources, U.S. can produce 1 ton of potato

Question

Suppose by using the same amounts of resources, U.S. can produce 1 ton of potatoes (P) or 3 tons of wheat (W) per hour, and Ireland can produce 1 ton of potatoes (P) or 2 tons of wheat (W) per hour. Then which of the following is true? (O.C.= opportunity cost) which of the following is true?




A. U.S. should export potatoes and import wheat.

B. U.S. should export wheat and import potatoes.

C. Ireland should export wheat and import potatoes.

D. A and C.

E. B and C.

Explanation / Answer

US: 1P or 3W I: 1P or 2W The US faces a larger opportunity cost of producing potatoes than Ireland (3W > 2W), So, the US should produce wheat and Ireland should produce potatoes. B is the correct answer.

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