ECON 101 Study Guide - Quiz Guide: Opportunity Cost

• School: U of M
• Department: Economics
• Course: ECON 101
• Professor: All

Document Summary

For completion in discussion sections, january 19 and 20. Drawn below are hypothetical production possibilities frontiers for grain-growers in the. We measure the quantity of wheat (in millions of tons) and quantity of corn (in millions of tons) on the horizontal and vertical axes, respectively. Canada (a) draw the joint production possibilities frontier, showing the maximum amount of wheat that can be produced in the two countries jointly for any level of corn production (between 0 and 25 million tons). To encourage some grain farmers to produce corn, we need at least one country"s opportunity cost of corn to be less than or equal to the relative price of corn. Usa has a lower opportunity cost of corn, 16/20 = 4/5 wheat per corn. It will produce corn if the relative price of corn, pcorn/pwheat, is greater than or equal to 4/5.