Assume the United States can produce Toyotas at the cost of $18,000 per car and Chevrolets at
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a. In terms of Chevrolets, what is the opportunity cost of producing Toyotas in each country?
b. Who has the comparative advantage in producing Chevrolets?
c. Assume Americans purchase 500,000 Chevrolets and 300,000 Toyotas each year and that the Japanese purchase far fewer of each. Using productive efficiency as the guide, which country should produce Chevrolets and which should produce Toyotas? Opportunity Cost
Opportunity cost is the profit lost when one alternative is selected over another. The Opportunity Cost refers to the expected returns from the second best alternative use of resources that are foregone due to the scarcity of resources such as land,...
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