Answer
(a) The opportunity cost of each car is 15 bushels of wheat.
Reason :
This is how many bushels of wheat a worker would be able to produce at the same time it takes to build one car.
Conversely, the opportunity cost of one car is 1/15th bushel of wheat.
These values are reciprocal to each other.
(b) If Canada were to produce 10 million cars it would take 5 million of their workers leaving the other 5 million workers to produce 30 bushels of wheat each for a total of 150 million bushels of wheat.
(c) If they were to trade cars to the US at a rate of 1 car for 20 bushels of wheat and a total of 10 million cars Canada would then consume 10 million cars and 200 million bushels of wheat, a point outside their production possibility curve without trade.
Work Step by Step
See the Graphs.
