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Figure: The Production Possibilities for Two Countries
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for 1.5 tires, the most that Indonesia can consume is _____ radios and _____ tires, while the most that Malaysia can consume is _____ radios and _____ tires.

Question

Use the following to answer questions:
Figure: The Production Possibilities for Two Countries 
-(Figure: The Production Possibilities for Two Countries) Look at the figure The Production Possibilities for Two Countries. If Indonesia and Malaysia trade 1 radio for 1.5 tires, the most that Indonesia can consume is _____ radios and _____ tires, while the most that Malaysia can consume is _____ radios and _____ tires.

Quizplus · Accepted Answer

Indonesia has a comparative advantage in producing radios, while Malaysia has a comparative advantage in producing tires. By trading, Indonesia can specialize in producing radios and consume 400 radios and 600 tires, while Malaysia can specialize in producing tires and consume 1,200 tires and 600 radios. This is shown by the point of consumption along each country's new production possibilities frontier.

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