Use the production possibilities data below for Avokia and Baldonia to answer the following question(s).
Table 2-2

-Refer to Table 2-2.According to the law of comparative advantage,both Avokia and Baldonia could gain if

Question

Use the production possibilities data below for Avokia and Baldonia to answer the following question(s).
Table 2-2

-Refer to Table 2-2.According to the law of comparative advantage,both Avokia and Baldonia could gain if

Quizplus · Accepted Answer

According to the law of comparative advantage, each country should specialize in producing the good that they have a lower opportunity cost of producing and then trade with the other country. In this case, Avokia has a comparative advantage in producing apples since they can produce 5 apples for every 1 orange, while Baldonia can only produce 1 apple for every 1 orange. On the other hand, Baldonia has a comparative advantage in producing oranges since they can produce 1 orange for every 1 apple, while Avokia can only produce 1 orange for every 5 apples. Therefore, if Avokia specializes in producing apples and Baldonia specializes in producing oranges, they can both gain from trade through mutually beneficial exchange.

Use the Production Possibilities Data Below for Avokia and Baldonia