Suppose that auto workers in South Korea can pro-duce components used to make cars at the rate
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Suppose that auto workers in South Korea can pro-duce components used to make cars at the rate of six sets of components per worker per day and can assemble cars at the rate of four cars per worker per day. In North Korea auto workers can produce components at the rate of one set of components per day and can assemble cars at the rate of three cars per worker per day. What is the opportunity cost of car assembly in terms of component production in each country? If one economy exports components and the other exports assembled cars, which economy will export cars according to the theory of comparative advantage?
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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In South Korea the opportunity cost of car assembly is 15 sets o...View the full answer
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