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)one of them will gain and one of them will lose.
B)each will gain because each can consume a combination of goods that is outside his production possibilities frontier.
C)each will produce a combination of goods that is outside his production possibilities frontier.
D)they each lose because they are no longer able to produce and consume both goods.
E)each will produce a combination of goods that is inside his production possibilities frontier.

Question

Quizplus · Accepted Answer

Specializing in producing the goods in which each has a comparative advantage allows them to produce more efficiently and effectively, leading to a combined surplus of goods that can be exchanged. Since each can consume a combination of goods that is outside his production possibilities frontier, both will gain from the trade. Therefore, choice (B) is the best answer.

Tom and Don Have Different Opportunity Costs of Producing Two