Use the production possibilities data below for Lebos and Slavia to answer the following question(s).
Table 2-1

-Refer to Table 2-1.According to the law of comparative advantage,both Lebos and Slavia could gain if

Question

Use the production possibilities data below for Lebos and Slavia to answer the following question(s).
Table 2-1

-Refer to Table 2-1.According to the law of comparative advantage,both Lebos and Slavia could gain if

Quizplus · Accepted Answer

According to the law of comparative advantage, a country should specialize in producing the good in which it has a lower opportunity cost and trade with other countries for the good in which it has a higher opportunity cost. From the data in the table, we can see that Lebos has a lower opportunity cost in producing food (1 food = 2 clothing) while Slavia has a lower opportunity cost in producing clothing (1 clothing = 0.5 food). Therefore, if Lebos specializes in producing food and Slavia specializes in producing clothing, they can both produce more of both goods and benefit from trade. Choosing option C would allow both countries to gain from trade and make the most efficient use of their resources.

Use the Production Possibilities Data Below for Lebos and Slavia