Question

Suppose Big Country can produce 80 units of X by using all its resources to produce X or 60 units of Y by devoting all its resources to Y. Comparable figures for Small Nation are 60 units of X and 60 units of Y. Assuming constant costs, Big Country needs to give up

Answer 1

the production of good Y, and stat trading with Small Nation in order to obtain good Y.

Step-by-step explanation:

Big country's opportunity cost of producing goods X instead of good Y = 60/80 = 0.75 good Y per good X

Big country's opportunity cost of producing goods Y instead of good X = 80/60 = 1.33 good X per good Y

While Small Nation's opportunity cost of producing either good X or good Y = 60/60 = 1

Since Big Country's opportunity cost of producing good Y is higher than Small Nation's opportunity cost, then Big Country should give up the production of good Y, and instead trade with Small Nation to obtain good Y.