Country A is producing 4 units of X and 8 units of Y and country B is producing 4 units of X and 6 units of Y. The opportunity cost of producing more of
A) good X is the same for both countries.
B) good Y is the same for both countries.
C) good X is lower in country A.
D) good Y is lower in country A.
It says the answer is D but could someone explain why because I thought it was C.
To determine the correct answer, we need to understand the concept of opportunity cost and compare the production possibilities of the two countries.
Opportunity cost refers to the benefit or value of the next best alternative foregone when making a decision. In the context of production, it measures the quantity of one good that must be given up to produce more of another good.
In this case, we have two goods: X and Y.
Country A is producing 4 units of X and 8 units of Y, while Country B is producing 4 units of X and 6 units of Y.
To calculate the opportunity cost, we need to compare the production ratios between the two goods in each country.
For Country A, the production ratio is 4 units of X to 8 units of Y, which can be simplified as 1 unit of X to 2 units of Y.
For Country B, the production ratio is 4 units of X to 6 units of Y, which can be simplified as 2/3 units of X to 1 unit of Y.
Now, let's compare the opportunity costs:
A) The opportunity cost of producing more of good X is the same for both countries.
To calculate the opportunity cost of producing more of good X, we need to compare how much of good Y needs to be given up. In Country A, to produce one more unit of X, two units of Y are given up (1X:2Y). In Country B, to produce one more unit of X, 1.5 units of Y are given up (2/3X:1Y). Since these ratios are different, the opportunity cost of producing more of good X is not the same for both countries. Therefore, option A is incorrect.
B) The opportunity cost of producing more of good Y is the same for both countries.
To calculate the opportunity cost of producing more of good Y, we need to compare how much of good X needs to be given up. In Country A, to produce one more unit of Y, 0.5 units of X are given up (1X:2Y). In Country B, to produce one more unit of Y, 1.33 units of X are given up (2/3X:1Y). Since these ratios are different, the opportunity cost of producing more of good Y is not the same for both countries. Therefore, option B is incorrect.
C) The opportunity cost of producing more of good X is lower in country A.
As mentioned earlier, in Country A, producing one more unit of X requires giving up two units of Y (1X:2Y). In Country B, producing one more unit of X requires giving up 1.5 units of Y (2/3X:1Y). Since Country A gives up more Y to produce the same amount of X, the opportunity cost of producing more of good X is lower in Country B, not Country A. Therefore, option C is incorrect.
D) The opportunity cost of producing more of good Y is lower in country A.
In Country A, producing one more unit of Y requires giving up 0.5 units of X (1X:2Y). In Country B, producing one more unit of Y requires giving up 1.33 units of X (2/3X:1Y). Since Country A gives up fewer X to produce the same amount of Y, the opportunity cost of producing more of good Y is lower in Country A. Therefore, option D is correct.
In conclusion, the correct answer is option D), as the opportunity cost of producing more of good Y is lower in country A.