Step 1
Work It Out
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You must read each slide, and complete any questions on the slide, in sequence.
Assume Saudi Arabia and the United States face the production possibilities for oil and cars shown in the table.
| Saudi Arabia | United States | ||
|---|---|---|---|
| Quantity of oil (millions of barrels) |
Quantity of cars (millions) |
Quantity of oil (millions of barrels) |
Quantity of cars (millions) |
| 0 | 4 | 0 | 10.0 |
| 200 | 3 | 100 | 7.5 |
| 400 | 2 | 200 | 5.0 |
| 600 | 1 | 300 | 2.5 |
| 800 | 0 | 400 | 0 |
Table
Calculate the following opportunity costs:
The opportunity cost of producing a car in Saudi Arabia is million barrels of oil.
The opportunity cost of producing a car in the United States is million barrels of oil.
The opportunity cost of producing a barrel of oil in Saudi Arabia is of a car (in decimal form). Round your answer to three decimal places.
The opportunity cost of producing a barrel of oil in the United States is of a car (in decimal form). Round your answer to three decimal places.
In Saudi Arabia 1 million cars can be produced by giving up production of 200 million barrels of oil. So the opportunity cost of 1 car in Saudi Arabia is 200 million barrels of oil.
The opportunity cost of producing 2.5 million cars in the United States is 100 million barrels of oil. So the opportunity cost of 1 car is equal to 100 million/2.5 million = 40 million barrels of oil.
The opportunity cost of producing 1 barrel of oil in Saudi Arabia is 0.005 of a car.
The opportunity cost of producing 1 barrel of oil in the United States is 0.025 of a car.
For review see section “Production Possibilities and Comparative Advantage, Revisited”
The opportunity cost of producing 2.5 million cars in the United States is 100 million barrels of oil. So the opportunity cost of 1 car is equal to 100 million/2.5 million = 40 million barrels of oil.
The opportunity cost of producing 1 barrel of oil in Saudi Arabia is 0.005 of a car.
The opportunity cost of producing 1 barrel of oil in the United States is 0.025 of a car.
For review see section “Production Possibilities and Comparative Advantage, Revisited”
Calculate the following opportunity costs:
In Saudi Arabia 1 million cars can be produced by giving up production of 200 million barrels of oil. So the opportunity cost of 1 car in Saudi Arabia is 200 million barrels of oil.
The opportunity cost of producing 2.5 million cars in the United States is 100 million barrels of oil. So the opportunity cost of 1 car is equal to 100 million/2.5 million = 40 million barrels of oil.
The opportunity cost of producing 1 barrel of oil in Saudi Arabia is 0.005 of a car.
The opportunity cost of producing 1 barrel of oil in the United States is 0.025 of a car.
For review see section “Production Possibilities and Comparative Advantage, Revisited”
The opportunity cost of producing 2.5 million cars in the United States is 100 million barrels of oil. So the opportunity cost of 1 car is equal to 100 million/2.5 million = 40 million barrels of oil.
The opportunity cost of producing 1 barrel of oil in Saudi Arabia is 0.005 of a car.
The opportunity cost of producing 1 barrel of oil in the United States is 0.025 of a car.
For review see section “Production Possibilities and Comparative Advantage, Revisited”
Calculate the following opportunity costs: