Figure 2-8 Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala.Each country produces two goods,pineapples and coconuts.
-Refer to Figure 2-8.Which country has a comparative advantage in the production of pineapples?

Question

Figure 2-8  Figure 2-8 shows the production possibilities frontiers for Costa Rica and Guatemala.Each country produces two goods,pineapples and coconuts.
-Refer to Figure 2-8.Which country has a comparative advantage in the production of pineapples?

Quizplus · Accepted Answer

In Figure 2-8, Costa Rica has a steeper slope of its production possibility frontier (PPF) for pineapples compared to Guatemala's PPF. This indicates that Costa Rica has a comparative advantage in producing pineapples, as it has a lower opportunity cost of producing pineapples in terms of coconuts forgone. In contrast, Guatemala has a flatter slope of its PPF for pineapples, indicating that it has a comparative advantage in producing coconuts. Therefore, Costa Rica should specialize in producing pineapples and trade with Guatemala for coconuts, based on the principle of comparative advantage.

Figure 2-8 Figure 2-8 Shows the Production Possibilities Frontiers