Assume that the world economy consists of two countries: Russia and Republic of Belarus. Each country can produce tomatoes and potatoes. Russia can produce 1000 tons of tomatoes or 3000 tons of potatoes or any linear combination of tomatoes and potatoes that satisfies potatoes + 3 × tomatoes = 3000. Republic of Belarus can produce 500 tons of tomatoes or 1000 tons of potatoes or any linear combination of tomatoes and potatoes that satisfies potatoes + 2 × tomatoes = 1000. Countries can freely trade with each other.
-Which country has absolute advantage in producing potatoes?
A) Russia
B) Republic of Belarus
C) Both countries
D) Neither country

Question

Quizplus · Accepted Answer

Russia can produce 3000 tons of potatoes while Republic of Belarus can produce only 1000 tons of potatoes. Hence, Russia has an absolute advantage in producing potatoes.

The best choice would be for Russia to specialize in producing potatoes and Republic of Belarus to specialize in producing tomatoes. Russia can produce enough potatoes for both countries and Republic of Belarus can produce enough tomatoes for both countries. This will lead to efficient production and trade between the countries, resulting in a higher overall output for both tomatoes and potatoes.

Assume That the World Economy Consists of Two Countries: Russia