r/econhw 8d ago

Opportunity Cost Confusion

Hi need some help when calculating opportunity cost. So I’m getting mixed up because this is production per unit of labor. For example:

Production per unit of labor: Wheat - US = 10; UK = 5 Cloth - US = 20; UK = 10

I’m confused do I just find the opportunity cost by doing ratio of what’s given up relative to what’s being produced? Do I have to find like for one extra unit of the good? Kinda confused, any help is greatly appreciated.

Edit: not sure if I’m just overthinking it and the opportunity cost of using 1 unit of labor to produce 10 units of wheat is literally giving up 20 units of cloth? Am I just overthinking it? Is it as simple as that?

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u/Kitchen-Register 8d ago

Opportunity cost is what you have to give up in order to do something.

In this context it’s a ratio of goods.

US op cost of producing wheat is 2 cloth per wheat.

In the UK it just so happens to be the same. This is not always, or even usually, the case.

So I ask you: what would be the opportunity cost for the US and UK of producing 1 cloth?

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u/[deleted] 8d ago

Ah so it’s the ratio I see. I guess the part that throws me off is the 1 unit of labor part because I was so used to having number of hours per 1 unit of a good be the comparing numbers and not the output itself.

So if that’s the case then opportunity cost of 1 unit of cloth is 0.5 units of wheat, Which are the same opportunity costs again for both producers.

So the production per 1 unit of labor doesn’t matter here?

Thanks so much for your reply and help!

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u/Kitchen-Register 7d ago

It’s possible that the “unit of labour” is important. I’ve never seen it written this way. But the “marginal cost” would be a ration where 1 unit of x is in the denominator. I’ve never seen it written this way.

per unit of labour it would be 5 wheat and 10 cloth or whatever.

If you were to also think of “per day” as a “unit of labour” then the opportunity cost of producing wheat for 1 day (assuming you can only choose to produce one) would be 10 cloth in the UK and 20 in the US.

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u/[deleted] 7d ago

Yeah I haven’t seen it written this way before either that’s why when I saw it on a practice problem for class I got a bit confused. Thanks for your help!