Question

Two nations are negotiating a trade agreement for two goods. Both nations have the same amount of resources available to produce the two goods. Using the production possibilities curves above, you can determine that the opportunity cost of one unit of good B is

Answer 1

Answer:

4 units of good A for Nation X and 1/2 unit of good A for Nation Y

Explanation:

In an economic system where there are two or more goods to be produced, the concept of opportunity cost steps in. Opportunity cost is when a good is chosen to be produced at the expense of other goods due to limited resources. Therefore, the opportunity cost per unit of commodity B is estimated as 4 units and 0.5 units of commodity A for Nations X and Y respectively.