Vietnam and Ecuador both produce shrimp and rice. Vietnam can produce 180 thousand pounds of shrimp or 60 thousand pounds of rice in a year. Ecuador can produce 130 thousand pounds of shrimp or 26 thousand pounds of rice in a year.

a. Vietnam's opportunity cost of producing one pound of rice is equal to

b. Ecuador's opportunity cost of producing one pound of rice is equal to

Question

Business

Damari Hill

9 November, 01:19

Vietnam and Ecuador both produce shrimp and rice. Vietnam can produce 180 thousand pounds of shrimp or 60 thousand pounds of rice in a year. Ecuador can produce 130 thousand pounds of shrimp or 26 thousand pounds of rice in a year.

a. Vietnam's opportunity cost of producing one pound of rice is equal to

b. Ecuador's opportunity cost of producing one pound of rice is equal to

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Answers (1)

Know the Answer?

Gould · Answer 1

(a) 3 pounds of shrimp

(b) 5 pounds of shrimp

Explanation:

Opportunity costs refers to the costs or benefits that are foregone to select some other alternative.

Vietnam can produce 180,000 pounds of shrimp or 60,000 pounds of rice in a year:

Opportunity cost of producing one pound of rice = 180,000 : 60,000

= 3 pounds of shrimp

Ecuador can produce 130,000 pounds of shrimp or 26,000 pounds of rice in a year:

Opportunity cost of producing one pound of rice = 130,000 : 26,000

= 5 pounds of shrimp

Therefore,

According to the principle of comparative advantage, the Vietnam has a comparative advantage in producing rice because it has a opportunity cost of producing rice than Ecuador.