Figure 3-4

-Refer to Figure 3-4. If point A represents Alvina's current production and point B represents Betty's current production, under what circumstances can both Alvina and Betty benefit from specialization and trade?
A)Alvina produces more pizzas and Betty produces more lemonade.
B)Alvina produces more lemonade and Betty produces more pizzas.
C)Both Alvina and Betty produce only pizzas.
D)There are no circumstances under which both Alvina and Betty can benefit from specialization and trade.

Question

Figure 3-4
  
-Refer to Figure 3-4. If point A represents Alvina's current production and point B represents Betty's current production, under what circumstances can both Alvina and Betty benefit from specialization and trade?
A)Alvina produces more pizzas and Betty produces more lemonade. 
B)Alvina produces more lemonade and Betty produces more pizzas. 
C)Both Alvina and Betty produce only pizzas. 
D)There are no circumstances under which both Alvina and Betty can benefit from specialization and trade.

Quizplus · Accepted Answer

Specialization and trade can benefit both parties if each specializes in the production of the good for which they have a comparative advantage. Without seeing Figure 3-4, the correct answer can be inferred based on the principle that if Alvina specializes in producing what she is relatively more efficient at (in this case, lemonade, as implied by the question) and Betty does the same for pizzas, both can trade their surplus production for the other good, thus potentially consuming more of both goods than they would be able to produce on their own.

Figure 3-4 -Refer to Figure 3-4. If Point a Represents Alvina's Current