The graph below shows the production possibility curves for two hypothetical nations, Orin and Pohl, which each make two hypothetical products, jaxs and keps. Which of the following statements is correct?

Question

Quizplus · Accepted Answer

A nation has comparative advantage in producing a good if it can produce that good at a lower opportunity cost than another nation. In this graph, we can see that the opportunity cost of producing jaxs is lower in Pohl (it only needs to give up a small amount of keps to produce jaxs) compared to Orin (it needs to give up a large amount of keps to produce jaxs). Therefore, Pohl has a comparative advantage in jaxs. Note that we cannot make a conclusion about which nation has a comparative advantage in keps because we do not know the opportunity cost of producing keps for each nation. We also cannot make a conclusion about which nation is more efficient because efficiency is not solely determined by production possibilities but also by factors such as technology and resource allocation.

The Graph Below Shows the Production Possibility Curves for Two