If the fictitious country of Islandia puts all of its production resources into fish, it can produce 60 units of fish. If it put

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If the fictitious country of Islandia puts all of its production resources into fish, it can produce 60 units of fish. If it put

s all of its production resources into coconuts, it can produce 30 units of coconuts. If the fictitious country of Mountania puts all of its production resources into fish, it can produce 15 units of fish. If it puts all of its production resources into coconuts, it can produce 45 units of coconuts. Assume that both countries have constant cost functions for both products. nstructions: Round your answers to 2 decimal places. a. What is the opportunity cost of producing 1 unit of fish in Islandia? unit(s) of coconuts b. What is the opportunity cost of producing 1 unit of coconuts in Islandia? unit(s) of fisih c. What is the opportunity cost of producing 1 unit of fish in Mountania? unit(s) of coconuts d. What is the opportunity cost of producing 1 unit of coconuts in Mountania? unitis) of fish e. (Click to select)has a comparative advantage in the production of fish. ck to select) has a comparative advantage in the production of coconuts. f. What will be the terms of trade for fish? Betweena andunits) of coconuts . What will be the terms of trade for coconuts? and?

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1 answer:

Free_Kalibri [3.7K] · Answer 1 · 2026-02-25T20:32:30+03:00

Answer:

Mountania can exchange 1.5 units of coconut for 0.66 units of fish.

Explanation:

a. The opportunity cost to produce 1 unit of fish in Islandia is how many units of coconut?

It can yield either 60 units of fish or 30 units of coconuts.

Consequently, the opportunity cost for producing 1 unit of fish equates to 30 coconuts divided by 60 fish, which results in 0.5 units of coconut.

b. The opportunity cost to produce 1 unit of coconut in Islandia is how many units of fish?

Production can be either 60 fish or 30 coconuts.

Thus, the opportunity cost for 1 coconut is calculated as 60 fish over 30 coconuts, leading to 2 fish.

c. The opportunity cost to produce 1 unit of fish in Mountania is how many units of coconuts?

Mountania's production capacity allows for either 15 units of fish or 45 units of coconuts.

Hence, producing 1 fish incurs an opportunity cost of 45 coconuts divided by 15 fish, resulting in 3 coconuts.

d. The opportunity cost to produce 1 unit of coconut in Mountania is how many units of fish?

Again, Mountania can manufacture either 15 fish or 45 coconuts.

This indicates that producing 1 coconut costs 15 fish over 45 coconuts, which is equal to 0.33 units of fish.

e. (Click to select) has a comparative advantage in fish production. (Click to select) has a comparative advantage in coconut production.

Islandia can produce 60 fish or 30 coconuts, while Mountania can yield 15 fish or 45 coconuts.

Therefore, Islandia has a comparative advantage in fish production as it can produce 45 additional fish using the same resources.

f. The terms of trade for fish is how many units of coconut?

When 1.5 units of coconut are used as a basis for trade, it aligns with Mountania's opportunity cost for fish (3 coconuts) multiplied by Islandia's cost for fish (0.5 coconuts). This trade at 1.5 coconuts per fish will be satisfactory for both countries since it exceeds what Islandia would gain while being lower than the burden for Mountania.

What will be the terms of trade for coconuts?

Exchanging 0.66 fish per coconut can be established based on Islandia’s opportunity cost for coconut (2 fish) multiplied by Mountania’s (0.33 coconut). This trade, set at 0.66 fish per coconut, proves beneficial for both nations, as it is more favorable than what Islandia would have faced and more advantageous than what Mountania would have received.