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Suppose the World Economy Is Composed of Just Two Countries

Question 225

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Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. It can be deduced that A) Greece has a comparative advantage in chemicals. B) Greece has the absolute advantage in both products. C) Italy has a comparative advantage in chemicals. D) it is more costly in terms of resources to produce steel in Italy. Suppose the world economy is composed of just two countries: Italy and Greece. Each can produce steel or chemicals, but at different levels of economic efficiency. The production possibilities curves for the two countries are shown in the graphs. It can be deduced that


A) Greece has a comparative advantage in chemicals.
B) Greece has the absolute advantage in both products.
C) Italy has a comparative advantage in chemicals.
D) it is more costly in terms of resources to produce steel in Italy.

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