Figure 34-7

In Figure 34-7, it is probably true that wages are

Question

Figure 34-7

In Figure 34-7, it is probably true that wages are

Quizplus · Accepted Answer

The figure shows that the production possibility frontiers of Pestoland and Pastaland intersect at point E. At this point, Pestoland produces more pesto than pasta, while Pastaland produces more pasta than pesto. The slope of the production possibility frontier at point E represents the opportunity cost of producing one good in terms of the other. Since the slope of the production possibility frontier is steeper in Pastaland than in Pestoland, Pastaland has a comparative advantage in pasta production, while Pestoland has a comparative advantage in pesto production. This suggests that wages in Pastaland are likely to be greater in pasta production than in pesto production, while wages in Pestoland are likely to be greater in pesto production than in pasta production. Therefore, choice B is the best answer.

Figure 34-7 In Figure 34-7, It Is Probably True That Wages Are