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

Callie Finley

31 August, 12:08

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

+2

Answers (1)

Know the Answer?

Noe Ellis · 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.