Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product.

-Trade is possible because Canary Island's opportunity cost of coconuts is less than Barbootland's.

Question

Exhibit B-1 below shows the quantity of thing-a-ma-jigs or truffala fruit that can be produced by each country, if all of its resources are devoted to that product.
 
-Trade is possible because Canary Island's opportunity cost of coconuts is less than Barbootland's.

Quizplus · Accepted Answer

Trade is possible and beneficial when two countries have different opportunity costs for producing goods. If the Canary Islands can produce coconuts at a lower opportunity cost than Barbootland, it means the Canary Islands have a comparative advantage in producing coconuts, making trade between the two beneficial.

Exhibit B-1 Below Shows the Quantity of Thing-A-Ma-Jigs or Truffala