Refer to the above diagrams.Assume that prior to specialization and trade Italy and Greece preferred points I and G on their production possibilities curves.As a result of complete specialization according to comparative advantage,the resulting gains in output will be:
A) 5X and 15Y.
B) 10Y.
C) 15X and 5Y.
D) 25X.
Italy should solely make product X (50 units) and Greece should solely make product Y (60 units) .Initially,Italy made 25 units of both product X and product Y and Greece made 20 units of both product X and product Y,giving a combined output of 45 units of product X and 45 units of product Y.After specialization,there will be 50 units total of product X and 60 units total of product Y.This is a gain of 5 units of product X and 15 units of product Y.
Correct Answer:
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