Figure 18-7

-In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.In this graph, Pestoland has a comparative advantage in

Question

Figure 18-7
 
-In Figure 18-7, AB represents the production possibilities of Pestoland and CD that of Pastaland.In this graph, Pestoland has a comparative advantage in

Quizplus · Accepted Answer

The ratio OA/OB represents the opportunity cost of producing pasta in Pestoland, while the ratio OC/OD represents the opportunity cost of producing pasta in Pastaland. Since OA/OB is smaller than OC/OD, it means that Pestoland gives up less pesto to produce each unit of pasta compared to Pastaland. Therefore, Pestoland has a comparative advantage in producing pasta.

Figure 18-7 -In Figure 18-7, AB Represents the Production Possibilities of Pestoland