Explain why Jamaica's opportunity cost of one cooler is 0.5 radios and Norways opportunity cost on one cooler is 0.125 radios?

Question

Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. See the example posted in the announcements.

	Output Produced in One Day
Coolers------->	Radios-------->
Jamaica	12	6
Norway	24	3

Answer 1

In one day Jamaica can produce 12 coolers, or 6 radios, or some combination of the two. So you need to look at the tradeoff between coolers and radios.

If Jamaica was a one extreme producing 6 radios, it would have to give up all 6 to produce only coolers, where they can produce 12. This is the opportunity cost, how much of one good do you have to give up to produce exactly on unit of another. For Jamaica 6 radios per 12 coolers = .5 radio per 1 cooler.

For Norway 3 radios per 24 coolers = 1/8 radio per 1 cooler, or .125.