The following diagrams show the production possibilities boundaries for Austria and Switzerland,for the production of bicycles and shoes. FIGURE 32-2 Refer to Figure 32-2.If Austria and Switzerland engage in free trade with each other,it is likely that Switzerland will specialize in the production of ________ and Austria will specialize in the production of ________.

Question

The following diagrams show the production possibilities boundaries for Austria and Switzerland,for the production of bicycles and shoes.  FIGURE 32-2 Refer to Figure 32-2.If Austria and Switzerland engage in free trade with each other,it is likely that Switzerland will specialize in the production of ________ and Austria will specialize in the production of ________.

Quizplus · Accepted Answer

According to the production possibilities boundaries shown in the diagrams, Switzerland has a comparative advantage in the production of shoes as its boundary for shoe production is further out than its boundary for bicycle production. On the other hand, Austria has a comparative advantage in the production of bicycles as its boundary for bicycle production is further out than its boundary for shoe production. Therefore, if they engage in free trade, it is likely that Switzerland will specialize in the production of shoes and Austria will specialize in the production of bicycles, leading to a more efficient allocation of resources and higher overall production levels.

The Following Diagrams Show the Production Possibilities Boundaries for Austria