The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities
$\begin{array}{c|c|c|c|c|c}
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 120 & 90 & 60 & 30 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ Sigma's production possibilities
$\begin{array}{c|c|c|c|c|c}
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 40 & 30 & 20 & 10 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ On the basis of this information,

Question

The accompanying tables give production possibilities data for Gamma and Sigma. All data are in tons. Gamma's production possibilities
$\begin{array}{c|c|c|c|c|c} 
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 120 & 90 & 60 & 30 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ Sigma's production possibilities
$\begin{array}{c|c|c|c|c|c} 
& \mathrm{A} & \mathrm{B} & \mathrm{C} & \mathrm{D} & \mathrm{E} \
\hline \text { Tea } & 40 & 30 & 20 & 10 & 0 \
\hline \text { Pots } & 0 & 30 & 60 & 90 & 120 \
\hline
\end{array}$ On the basis of this information,

Quizplus · Accepted Answer

Gamma has an absolute advantage in producing both tea and pots because it can produce more of each product than Sigma. However, Sigma has a comparative advantage in producing tea because it has a lower opportunity cost for producing tea than Gamma. In Sigma, 1 ton of tea costs 3 tons of pots (60/20), while in Gamma, 1 ton of tea costs 3 tons of pots (90/30). Thus, Sigma should specialize in producing and exporting tea to Gamma, while Gamma should specialize in producing and exporting pots to Sigma. This will allow both countries to benefit from trade and increase their overall production and consumption possibilities.

The Accompanying Tables Give Production Possibilities Data for Gamma and Sigma