Suppose any four workers (selected randomly) in Kenya can together, produce either 2 cars or15 tons of coffee in a year. If Kenya’s total resource available is 10 million equally efficientworkers, (decimal quantities of the resource and the two goods are possible)(a) calculate the opportunity cost of producing one car in Kenya, in a year? [4 marks](b) calculate the opportunity cost of producing one ton of coffee in Kenya, in a year? [4 marks]
Question
Suppose any four workers (selected randomly) in Kenya can together, produce either 2 cars or15 tons of coffee in a year. If Kenya’s total resource available is 10 million equally efficientworkers, (decimal quantities of the resource and the two goods are possible)(a) calculate the opportunity cost of producing one car in Kenya, in a year? 4 marks calculate the opportunity cost of producing one ton of coffee in Kenya, in a year? [4 marks]
Solution
(a) To calculate the opportunity cost of producing one car in Kenya, we first need to understand the trade-off between producing cars and coffee. According to the problem, four workers can produce either 2 cars or 15 tons of coffee in a year. This means that the opportunity cost of producing 2 cars is 15 tons of coffee. Therefore, the opportunity cost of producing one car is 15/2 = 7.5 tons of coffee. This means that for every car produced, Kenya gives up the opportunity to produce 7.5 tons of coffee.
(b) Similarly, to calculate the opportunity cost of producing one ton of coffee, we look at the trade-off from the other perspective. If four workers can produce 15 tons of coffee or 2 cars, then the opportunity cost of producing 15 tons of coffee is 2 cars. Therefore, the opportunity cost of producing one ton of coffee is 2/15 = 0.133 cars. This means that for every ton of coffee produced, Kenya gives up the opportunity to produce approximately 0.133 cars.
Similar Questions
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