Use the following to answer questions :
Figure: The Market for Melons in Russia
-(Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons in Russia. If Russia is trading based on comparative advantage and the world price is D, then Russia has _____ in the production of melons.

Question

Use the following to answer questions :
Figure: The Market for Melons in Russia 
-(Figure: The Markets for Melons in Russia) Look at the figure The Market for Melons in Russia. If Russia is trading based on comparative advantage and the world price is D, then Russia has _____ in the production of melons.

Quizplus · Accepted Answer

If Russia is trading based on comparative advantage, then it must have a lower opportunity cost of producing melons than the world price (D). Looking at the figure, we can see that Russia's opportunity cost of producing one melon is only 0.5 units of wheat, compared to the world price of 1 unit of wheat. Therefore, Russia has a comparative advantage in the production of melons.

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