The productivity of a single resource in producing wheat and microchips in both Canada and Japan: One unit of resouce produces: Canada 50 tons wheat, 20 microchips and Japan 2 tons wheat, 12 microchips. (a) What is the opportunity cost of producing a ton of wheat in Canada ? How about in Japan?
To determine the opportunity cost of producing a ton of wheat in Canada and Japan, we need to compare the amount of the other product (microchips) that could have been produced instead.
Opportunity cost can be defined as the value or benefit of the next best alternative that is forgone when a choice is made. In this case, we will consider the opportunity cost in terms of microchips.
In Canada, one unit of resource can produce 50 tons of wheat and 20 microchips. Therefore, the ratio of wheat to microchips is 50:20, or simplified to 5:2. This means that for every 5 tons of wheat produced, 2 microchips could have been produced instead.
To find the opportunity cost of producing a ton of wheat in Canada, we divide the number of microchips that could have been produced instead (2) by the number of tons of wheat produced (5). Therefore, the opportunity cost of producing a ton of wheat in Canada is 2/5 microchips.
In Japan, one unit of resource can produce 2 tons of wheat and 12 microchips. Therefore, the ratio of wheat to microchips is 2:12, or simplified to 1:6. This means that for every ton of wheat produced, 6 microchips could have been produced instead.
To find the opportunity cost of producing a ton of wheat in Japan, we divide the number of microchips that could have been produced instead (6) by the number of tons of wheat produced (1). Therefore, the opportunity cost of producing a ton of wheat in Japan is 6 microchips.
Summary:
- The opportunity cost of producing a ton of wheat in Canada is 2/5 microchips.
- The opportunity cost of producing a ton of wheat in Japan is 6 microchips.