Reference no: EM132855406
Read the information given about a fake country
East Stan, if it devoted all its resources to the production of bicycles, could produce 100 bikes per month. Alternatively, it can dedicate all of its resources to shoe production and produce 400 shoes per month - or it can produce any combination of bikes and shoes. The possible combinations of the two products can be represented by a straight line connecting the maximum quantity if only one of them were produced.
West Stan, if it devoted all its resources to bicycle production, could produce 400 bicycles a month. Alternatively, it could dedicate all of its resources to shoes and produce 100 shoes a month - or it could produce any combination of bikes and shoes. The possible combinations of the two products can be represented by a straight line connecting the maximum quantity if only one of them were produced.
Answer the following questions.
A) What is the opportunity cost of producing an additional shoe in East Stan, given the number of bikes that were abandoned?
B) What is the opportunity cost of producing an additional shoe in West Stan, given the number of bikes that were abandoned?
C) Explain the difference in opportunity cost.