Production Possibilities Schedule Country X Country Y Sugar

Production Possibilities Schedule Country X Country Y Sugar Coffee 200 160 120 80 40 Sugar 0 40 80 120 160 200 Coffee 100 80 60 40 20 Choice 30 60 90 120 150 In the table above, if trade were to occur, what is the least that country Y is willing to accept for 1 uni of sugar? A. 2/3 unit of coffee B. 3/2 units of coffee C. 1/2 unit of coffee D. 200 units of coffee E. 1 unit of coffee

Solution

Answer.) E.) 1 unit of coffee

Note that no other option is an opportunity cost for country Y to trade 1 unit of sugar. In case of Choice C , opportunity cost of 1 unit of sugar is 1 unit of coffee.