Opportunity Cost - Assignment Example

International Economics; Questions & answers Question a Developing country of Sud Corn T.V 100,000 0 0 1000 The opportunity cost of 1000 television sets is 100,000 bushels of corn, therefore opportunity cost of producing a television set is given as,(1 x 100,000)/1000100The opportunity cost of 100,000 bushels of corn is 10,000 television sets, therefore the opportunity cost of a bushel of corn in this country is giving as,(1 x 1000)/ 100,0000.01The first ratio means that for developing country of Sud to produce additional unit of a television set, it must forgo 100 bushels of corn.

On the other hand, the country must forgo 0.01 units of television sets in order to produce an additional unit of bushels of cornQuestion bIndustr15ial country of NorteCornT.V150,0000015,000The opportunity cost 150,000 bushels of corn is 15,000 television sets, therefore the opportunity cost of a bushel of corn will be given as,(1 x 15000)/150,0000.1The opportunity cost of 15000 sets of television is 150,000 bushels of corn, therefore the opportunity cost of a set of is given as,(1 x 150,000)/ 1500010Question cCornTelevisionDeveloping country of Sud101000Industrial country of Norte110From the table above, developing country of Sud has absolute advantage in production of both corn and television since it cost less hours to produce a unit of both product in the country as compared to Industrial country of Norte.

CornTelevisionOpportunity costDeveloping country of Sud100,0001000Corn: 0.01T.V: 100Industrial country of Norte150,00015000Corn: 0.1T.V: 10Industrial country of Norte however has a comparative advantage in production of television set. Developing country of Sud on the other hand has a comparative advantage in production of Corn. The comparative advantage is due to the fact that to produce an additional set of television in Norte, the country forgoes less units of bushels of corn as compared to developing country of Sud.

The same is true for the case of corn in relation to developing country of Sud.Question dIf the two countries engage in business the Industrial country of Norte should export television sets while developing country of Sud exports bushels of corn, this is because a country is advisable to trade in a commodity in which it has a comparative advantage.Question eIf Norte and Sud agrees to trade 20 bushels of corn for a television set then this becomes the terms of trade. If they specialize will benefit as follows,For Sud, (100,000 x 1)/ 20From the trade Sud will get 5000 television sets.

Norte on the other hand will get,(20 x 15000)300,000 bushels of cornQuestion f _ answered on the excel part of the paper.Question gWith the terms of trade set at 20 bushels for one television set the amount of television sets produced by the two countries together will be given as,(120,000 x 1)/ 206000 set of televisionThe allocation of production of corn and television sets should be based on measure of comparative advantage. It means therefore that Norte should specialize in making the television sets while Sud should embark in corn production.

Work CitedMankiw, N. Gregory. Principles of Economics. Fort Worth, TX: Dryden, 2008. Print.