Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 50 per day. If Atlantis produces only kayaks, it can make 75 per day. If Pacifica produces only surfboards, it can make 75 per day. If Pacifica produces only kayaks, it can make 75 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.

Question

Quizplus · Accepted Answer

Since Atlantis has a comparative advantage in producing surfboards (can make 50/day) and Pacifica has a comparative advantage in producing kayaks (can make 75/day), it is beneficial for them to specialize in the production of the good in which they have a comparative advantage, and trade with each other. Thus, Pacifica will specialize in producing kayaks and Atlantis will specialize in producing surfboards.

Suppose There Are Only 2 Nations, Atlantis and Pacifica, and Only