Question

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

Answer 1

Answer:

(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.