Question

Suppose that there are 7 million workers in Mexico and that each of these workers can produce either 2 cars or 50 bushels of wheat in a year.

The opportunity cost of producing a car in Mexico is   bushels of wheat, and the opportunity cost of producing a bushel of wheat in Mexico is   cars.

Answer 1

Workers can produce car in a year = 2
Workers can produce bushels of wheat in a year = 50
Now, the opportunity cost of producing a car in Mexico is (50 / 2) = 25 bushels of wheat.
The opportunity cost of producing a bushel of wheat is (2/50) = 1/25 cars.
The opportunity cost of producing something is the cost incurred when we decide to produce the best alternative while sacrificing another item which could have been produced during that particular period of time. Here, opportunity cost is the ratio of the good we sacrifice to that of the good we gain.