The Data Below Show the Total Production (In Millions)of the Only

question 132

Essay

The data below show the total production (in millions)of the only two goods produced in the countries of Carleton and Cumbria.
a)What is the opportunity cost of a binocular in Carleton?
b)What is the opportunity cost of a camera in Cumbria?
c)If,before trade,each country was devoting half its resources to producing each product,what is the total amount they were both producing?
d)If the two countries were to specialize in producing the product they do best,what would be the total amount they could produce?
e)What are the total gains as a result of specialization?

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Definitions:

Minimum Efficient Scale

The smallest level of production at which a firm can achieve the lowest long-run average total costs.

Constant Returns to Scale

A situation in which the proportionate increase in inputs leads to an equal proportionate increase in outputs, meaning costs and outputs scale equally as production expands.

Diseconomies of Scale

A situation where a business's cost per unit increases as it produces more items, due to inefficiencies that arise with scaling up production.

Plant Size

Refers to the physical capacity or output level of a manufacturing or production facility.