Use the figure below to answer the following questions.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.

-Refer to Table 2.4.1. Each country will gain from trade if
A)Romulus specializes in both goods.
B)Vulcan specializes in both goods.
C)they both continue to produce both goods.
D)Vulcan specializes in good X and Romulus specializes in good Y.
E)Romulus specializes in good X and Vulcan specializes in good Y.

Question

Use the figure below to answer the following questions.
Table 2.4.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
 
-Refer to Table 2.4.1. Each country will gain from trade if
A)Romulus specializes in both goods. 
B)Vulcan specializes in both goods. 
C)they both continue to produce both goods. 
D)Vulcan specializes in good X and Romulus specializes in good Y. 
E)Romulus specializes in good X and Vulcan specializes in good Y.

Quizplus · Accepted Answer

Based on the production possibility frontier, Romulus has a comparative advantage in producing good X while Vulcan has a comparative advantage in producing good Y. Therefore, if Romulus specializes in producing good X and Vulcan specializes in producing good Y, both countries will be able to produce at a lower opportunity cost and can trade to maximize their gains. Therefore, the best choice is E - Romulus specializes in good X and Vulcan specializes in good Y.

Use the Figure Below to Answer the Following Questions