${ \text { Alpha's production possibilities } }$
$\begin{array}{l}
\begin{array} { | l | c | c | c | c | c | }
\hline & A & B & C & D & E \
\hline \text { Fish (Tons) } & 80 & 60 & 40 & 20 & 0 \
\hline \text { Chips (Tons) } & 0 & 5 & 10 & 15 & 20 \
\hline
\end{array}\\\
{ \text { Beta's production possibilities } } \
\begin{array} { | l | c | c | c | c | c | }
\hline & A & B & C & D & E \
\hline \text { Fish (Tons) } & 240 & 180 & 120 & 60 & 0 \
\hline \text { Chips (Tons) } & 0 & 10 & 20 & 30 & 40 \
\hline
\end{array}
\end{array}$ The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Beta

Question

${ \text { Alpha's production possibilities } }$
$\begin{array}{l}
\begin{array} { | l | c | c | c | c | c | } 
\hline & A & B & C & D & E \
\hline \text { Fish (Tons) } & 80 & 60 & 40 & 20 & 0 \
\hline \text { Chips (Tons) } & 0 & 5 & 10 & 15 & 20 \
\hline
\end{array}\\\
{ \text { Beta's production possibilities } } \
\begin{array} { | l | c | c | c | c | c | } 
\hline & A & B & C & D & E \
\hline \text { Fish (Tons) } & 240 & 180 & 120 & 60 & 0 \
\hline \text { Chips (Tons) } & 0 & 10 & 20 & 30 & 40 \
\hline
\end{array}
\end{array}$ The tables give production possibilities data for two countries, Alpha and Beta, which have populations of equal size. Beta

Quizplus · Accepted Answer

Looking at the production possibilities tables, we can see that Beta has an absolute advantage in both fish and chips production. However, in order to determine comparative advantage, we need to calculate each country’s opportunity cost. Alpha has an opportunity cost of 1/5 for every ton of fish it produces (it gives up 1/5 ton of chips for every ton of fish produced) and Beta has an opportunity cost of 1/3 for every ton of fish it produces (it gives up 1/3 ton of chips for every ton of fish produced). This means that Beta has a lower opportunity cost for producing fish, and therefore has a comparative advantage in fish production. Alpha has a lower opportunity cost for producing chips and therefore has a comparative advantage in chips production. Based on this, Beta should specialize in catching fish and trade with Alpha for chips, resulting in gains from trade for both countries. Therefore, option A is the best choice.

Alpha’s production possibilities { \text { Alpha's production possibilities } } Alpha’s production possibilities The Tables Give Production Possibilities Data for Two Countries, Alpha

${ \text { Alpha's production possibilities } }$ The Tables Give Production Possibilities Data for Two Countries, Alpha