Use the Following Scenario to Answer the Questions That Follow

question 12

Multiple Choice

Use the following scenario to answer the questions that follow.
An economy has two workers, Smith and Ricardo. Every day they work, Smith can produce 4 computers or 16 smartphones, and Ricardo can produce 6 computers or 12 smartphones.
-What is the opportunity cost for Ricardo to produce one smartphone?

• A) 1/4 computer
• B) 1/2 computer
• C) 1 computer
• D) 2 computers
• E) 4 computers

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Definitions:

Duopoly

A two-firm oligopoly.

Demand Curve

A graph depicting the relationship between the price of a good and the quantity demanded by consumers, typically sloping downwards from left to right.

Competing Firm

A company that produces goods or services that are similar to those of another company, thereby participating in the same market.

Colluding Oligopoly

A market situation where a small number of firms agree to manipulate market conditions, such as price or output, for mutual benefit.