Figure 16-4
Number of workers needed to produce one unit of each of the following goods:

-In Figure 16-4,which of the following is true?
A)Gains from trade are possible if Korea produces radios and Colombia produces calculators.
B)No gains from trade are possible since neither country has an absolute advantage in producing both radios and calculators.
C)Gains from trade are not possible if Korea produces calculators and Colombia produces radios.
D)No trade will occur because neither country has a comparative advantage in producing either good.
E)No trade will occur because neither country has a comparative advantage in producing both radios and calculators.

Question

Figure 16-4
Number of workers needed to produce one unit of each of the following goods:
 
-In Figure 16-4,which of the following is true?
A)Gains from trade are possible if Korea produces radios and Colombia produces calculators. 
B)No gains from trade are possible since neither country has an absolute advantage in producing both radios and calculators. 
C)Gains from trade are not possible if Korea produces calculators and Colombia produces radios. 
D)No trade will occur because neither country has a comparative advantage in producing either good. 
E)No trade will occur because neither country has a comparative advantage in producing both radios and calculators.

Quizplus · Accepted Answer

Based on the information provided, Korea has an absolute advantage in producing radios since it only needs 2 workers per unit compared to Colombia's 3 workers per unit. On the other hand, Colombia has an absolute advantage in producing calculators since it only needs 1 worker per unit compared to Korea's 2 workers per unit. Therefore, if Korea produces radios and Colombia produces calculators, they can specialize and trade with each other, leading to gains from trade.

Figure 16-4 Number of Workers Needed to Produce One Unit of Each