Table 3-37
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate.
-Refer to Table 3-37. Aruba should export
A)coolers and import radios.
B)radios and import coolers.
C)both goods and import neither good.
D)neither good and import both goods.

Question

Table 3-37
Assume that Aruba and Iceland can switch between producing coolers and producing radios at a constant rate. 
-Refer to Table 3-37. Aruba should export
A)coolers and import radios. 
B)radios and import coolers. 
C)both goods and import neither good. 
D)neither good and import both goods.

Quizplus · Accepted Answer

Based on comparative advantage, Aruba has a lower opportunity cost of producing radios (1/2 cooler) compared to Iceland (1 cooler). Therefore, Aruba should specialize in producing radios and export them to Iceland, while importing coolers from Iceland.

Table 3-37 Assume That Aruba and Iceland Can Switch Between Producing Coolers