Scenario: Consider two economies, Beta and Zeta. Each farmer in Beta can grow 1,000 pounds of apples or 500 pounds of oranges in a year. Each farmer in Zeta can grow 400 pounds of apples or 1,200 pounds of oranges in a year.
-Refer to the scenario above.Which of the following statements is true in this case?

Question

Quizplus · Accepted Answer

CBeta has an absolute advantage in producing both apples and oranges because its farmers can produce more of both fruits compared to Zeta's farmers. However, Beta has a comparative advantage in producing apples because it has to give up fewer oranges to produce apples compared to Zeta (the opportunity cost of producing apples is lower in Beta). Zeta, by contrast, has a comparative advantage in producing oranges because it has to give up fewer apples to produce oranges compared to Beta (the opportunity cost of producing oranges is lower in Zeta).

Scenario: Consider Two Economies, Beta and Zeta