Use the following to answer question:
-(Figure: The Production Possibilities for Two Countries)Use Figure: The Production Possibilities for Two Countries.Trade will NOT take place if 1 microchip trades for _____ tire(s).

Question

Use the following to answer question: 
-(Figure: The Production Possibilities for Two Countries)Use Figure: The Production Possibilities for Two Countries.Trade will NOT take place if 1 microchip trades for _____ tire(s).

Quizplus · Accepted Answer

According to the figure, the opportunity cost of producing one microchip in Country A is 4 tires, while the opportunity cost of producing one microchip in Country B is 2 tires. Therefore, if one microchip trades for fewer than 4 tires in Country A or fewer than 2 tires in Country B, then there would be a comparative advantage for one country to specialize in producing microchips and the other country to specialize in producing tires, leading to trade. The only choice that satisfies this condition is A, where 1 microchip trades for 0.25 tires, which is less than the opportunity cost of producing microchips for Country A and less than the opportunity cost of producing tires for Country B.

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