Exhibit 19-1 Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.If the terms of trade are 1 fish per coconut, then Lambda and Beta would be able to benefit from specialization and trade.

Question

Exhibit 19-1  Exhibit 19-1 shows the production possibilities frontiers for the countries of Lambda and Beta for fish and coconuts.If the terms of trade are 1  fish per coconut, then Lambda and Beta would be able to benefit from specialization and trade.

Quizplus · Accepted Answer

Specialization and trade would be beneficial for both countries as they can exchange fish and coconuts at a mutually beneficial exchange rate of 1 fish per coconut. Lambda can specialize in producing fish and trade it for coconuts with Beta, which in turn can specialize in producing coconuts and trade it for fish with Lambda. This way, both countries can consume a combination of fish and coconuts that lie beyond their individual production possibilities frontier, thereby increasing their welfare.

Exhibit 19-1 Exhibit 19-1 Shows the Production Possibilities Frontiers