Use the following to answer question(s): The Production of Tires and Radios

-(Exhibit: The Production of Tires and Radios) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated.Further assume that the only input is labor and that it remains fully employed.Assume that there is unrestricted trade and complete specialization.According to comparative advantage, country:

Question

Use the following to answer question(s): The Production of Tires and Radios
 
-(Exhibit: The Production of Tires and Radios) Assuming constant costs in the neighborhood of their current levels of production, the exhibit shows the number of tires each country would have to forgo in order to produce the additional radios indicated.Further assume that the only input is labor and that it remains fully employed.Assume that there is unrestricted trade and complete specialization.According to comparative advantage, country:

Quizplus · Accepted Answer

According to the exhibit, Country X has a comparative advantage in producing tires as it has a lower opportunity cost in producing an additional tire (only forgoing 2/3 of a radio) compared to Country Y (which would have to forgo a whole radio to produce an additional tire). Therefore, Country X should specialize in producing tires and export them to Country Y. Similarly, Country Y has a comparative advantage in producing radios as it has a lower opportunity cost in producing an additional radio (only forgoing 1.5 tires) compared to Country X (which would have to forgo 2 tires to produce an additional radio). Therefore, Country Y should specialize in producing radios and export them to Country X. Hence, the correct answer is C, as Country X would export radios.

Use the Following to Answer Question(s): the Production of Tires