Figure 16-5
Quantities of goods that can be produced in one day with available resources:

-In Figure 16-5,which of the following is true?
A)Both countries can benefit from trade if Panama produces bicycles and Costa Rica produces rugs.
B)Both countries can benefit from trade if Panama produces both rugs and bicycles.
C)Both countries can benefit from trade if Panama produces rugs and Costa Rica produces bicycles.
D)Both countries can benefit from trade if Costa Rica produces bicycles and rugs.
E)Neither country can benefit from trade since Panama has an absolute advantage in producing both bicycles and rugs.

Question

Figure 16-5
Quantities of goods that can be produced in one day with available resources:
 
-In Figure 16-5,which of the following is true?
A)Both countries can benefit from trade if Panama produces bicycles and Costa Rica produces rugs. 
B)Both countries can benefit from trade if Panama produces both rugs and bicycles. 
C)Both countries can benefit from trade if Panama produces rugs and Costa Rica produces bicycles. 
D)Both countries can benefit from trade if Costa Rica produces bicycles and rugs. 
E)Neither country can benefit from trade since Panama has an absolute advantage in producing both bicycles and rugs.

Quizplus · Accepted Answer

Both countries can benefit from trade if they specialize in producing the goods for which they have a comparative advantage. If Panama produces bicycles and Costa Rica produces rugs, they can trade to mutual benefit.

Figure 16-5 Quantities of Goods That Can Be Produced in One Day