Production Possibility Schedules for Two South Pacific Island Nations $$\begin{array} { c }
{ \text { Kiribati } } \quad\quad\quad\quad\quad\quad\quad{ \text { Tuvalu } } \
\begin{array} { | c | c | c | c | }
\hline \text { Mangues } & \text { Cocanuts } & \text { Mangues } & \text { Cacanuts } \
\hline 300 & 0 & 1,200 & 0 \
\hline 200 & 400 & 800 & 1,200 \
\hline 100 & 800 & 400 & 2,400 \
\hline 0 & 1,200 & 0 & 3,600 \
\hline
\end{array}\end{array}$$ Which of the following statements is true?
A)Gains from trade are possible for both countries.
B)Only Kiribati will benefit from trade with Tuvalu.
C)Only Tuvalu will benefit from trade with Kiribati.
D)No gains from trade are possible for either Kiribati or Tuvalu.

Question

Production Possibility Schedules for Two South Pacific Island Nations $$\begin{array} { c } 
{ \text { Kiribati } }  \quad\quad\quad\quad\quad\quad\quad{ \text { Tuvalu } } \
\begin{array} { | c | c | c | c | } 
\hline \text { Mangues } & \text { Cocanuts } & \text { Mangues } & \text { Cacanuts } \
\hline 300 & 0 & 1,200 & 0 \
\hline 200 & 400 & 800 & 1,200 \
\hline 100 & 800 & 400 & 2,400 \
\hline 0 & 1,200 & 0 & 3,600 \
\hline
\end{array}\end{array}$$ Which of the following statements is true?
A)Gains from trade are possible for both countries.
B)Only Kiribati will benefit from trade with Tuvalu.
C)Only Tuvalu will benefit from trade with Kiribati.
D)No gains from trade are possible for either Kiribati or Tuvalu.

Quizplus · Accepted Answer

Gains from trade are possible for both countries because each country has a comparative advantage in producing one of the goods. Kiribati has a comparative advantage in producing coconuts (since it can produce them at a lower opportunity cost), and Tuvalu has a comparative advantage in producing mangoes. By specializing in these goods and trading, both countries can potentially consume more of both goods than they could without trade.

Production Possibility Schedules for Two South Pacific Island Nations Which of the Following Statements Is True? A)Gains from Trade

Production Possibility Schedules for Two South Pacific Island Nations Which of the Following Statements Is True?
A)Gains from Trade