Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate.
-Refer to Table 3-20. Brad should specialize in the production of
A)wheat and Theresa should specialize in the production of beef.
B)beef and Theresa should specialize in the production of wheat.
C)both goods and Theresa should specialize in the production of neither good.
D)neither good and Theresa should specialize in the production of both goods.

Question

Table 3-20
Assume that Brad and Theresa can switch between producing wheat and producing beef at a constant rate. 
-Refer to Table 3-20. Brad should specialize in the production of
A)wheat and Theresa should specialize in the production of beef. 
B)beef and Theresa should specialize in the production of wheat. 
C)both goods and Theresa should specialize in the production of neither good. 
D)neither good and Theresa should specialize in the production of both goods.

Quizplus · Accepted Answer

According to Table 3-20, Brad has a comparative advantage in producing beef as his opportunity cost of producing one unit of beef is only 2/3 units of wheat while Theresa's opportunity cost of producing one unit of beef is 3 units of wheat. On the other hand, Theresa has a comparative advantage in producing wheat as her opportunity cost of producing one unit of wheat is only 1/3 units of beef while Brad's opportunity cost of producing one unit of wheat is 2 units of beef. Therefore, Brad should specialize in producing beef, and Theresa should specialize in producing wheat. Together, they can produce at the most efficient level and trade with each other to both benefit from the exchange.

Table 3-20 Assume That Brad and Theresa Can Switch Between Producing Wheat