Tom and Don have different opportunity costs of producing two goods.If Tom and Don specialize in producing the goods in which each has a comparative advantage and they exchange goods,then
A)they each lose because they are no longer able to produce and consume both goods.
B)one of them will gain and one of them will lose.
C)each will gain because each can consume a combination of goods that is outside his production possibilities frontier.
D)each will produce a combination of goods that is outside his production possibilities frontier.
E)each will produce a combination of goods that is inside his production possibilities frontier.

Question

Quizplus · Accepted Answer

By specializing in their respective comparative advantages, Tom and Don can produce more of their respective goods than if they tried to produce both goods. By exchanging goods, they can each consume a combination of goods that is outside their individual production possibilities frontiers, leading to gains for both parties. Therefore, each will gain because they can consume a combination of goods that is outside their individual production possibilities frontiers.

Tom and Don Have Different Opportunity Costs of Producing Two