Suppose there are only 2 nations, Atlantis and Pacifica, and only two goods, surfboards and kayaks. If Atlantis produces only surfboards, it can make 27 per day. If Atlantis produces only kayaks, it can make 18 per day. If Pacifica produces only surfboards, it can make 32 per day. If Pacifica produces only kayaks, it can make 24 per day. After trade begins, ________ will specialize in the production of surfboards and ________ will specialize in the production of kayaks.

Question

Quizplus · Accepted Answer

In order to determine which nation should specialize in which good, we need to compare their opportunity costs. 
The opportunity cost of producing a surfboard for Atlantis is 18 kayaks (27 surfboards / 1.5 kayaks per surfboard). 
The opportunity cost of producing a surfboard for Pacifica is 0.75 kayaks (32 surfboards / 24 kayaks per surfboard). 
The opportunity cost of producing a kayak for Atlantis is 1.5 surfboards (18 kayaks / 12 surfboards per kayak). 
The opportunity cost of producing a kayak for Pacifica is 1.33 surfboards (24 kayaks / 18 surfboards per kayak). 
As we can see, Pacifica has a lower opportunity cost for producing surfboards and Atlantis has a lower opportunity cost for producing kayaks. Therefore, Pacifica should specialize in surfboard production and Atlantis should specialize in kayak production.

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