The nation of Leisureland can produce two goods, bicycles and bowling balls. The western region of Leisureland can, if it devotes all its resources to bicycle production, produce 100 bicycles per month. Alternatively, it could devote all its resources to bowling balls and produce 400 per month—or it could produce any combination of bicycles and bowling balls lying on a straight line between these two extremes. The eastern region of Leisureland can, if it devotes all its resources to bicycle production, produce 400 bicycles per month. Alternatively, it could devote all its resources to bowling balls and produce 100 per month—or it could produce any combination of bicycles and bowling balls lying on a straight line between these two extremes. Respond to the following questions (you may want to construct a graph in order to help with your answers – you are not required to present a graph): 

a) What it is the opportunity cost of producing an additional bowling ball measured in terms of forgone bicycles in western Leisureland? 

b) What is the opportunity cost of producing an additional bowling ball measured in terms of forgone bicycles in eastern Leisureland? 

c) Explain the difference in opportunity cost between western and eastern Leisureland. Which region has a comparative advantage in producing bowling balls?Bicycles? 

d) Suppose it is determined that 400 bicycles must be produced. How many bowling balls can be produced? 

e) Where will these goods be produced?

Answer rating: 100% (QA)

SOLUTION a Opportunity cost of producing an extra or additional bowling ball measured in terms of th... View the full answer