Question

Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. The workers in Country A should specialize in __________________ because they possess the ___________________ in the production of that good.

Answer 1

Answer: Bananas; Lower opportunity cost

Explanation:

In country A:

Opportunity cost of producing a banana = $\frac{5}{25}$

                                                                   = 0.2 tomato

Opportunity cost of producing a tomato = $\frac{25}{5}$

                                                                   = 5 bananas

In country B:

Opportunity cost of producing a banana = $\frac{6}{18}$

                                                                   = 0.33 tomato

Opportunity cost of producing a tomato = $\frac{18}{6}$

                                                                   = 3 bananas

Hence, workers in country A should specialize in the production of Bananas because the opportunity cost of producing a banana is lower than the country B.