Use the production possibilities data below to answer the following question(s). Table 2-3
Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in
A) meat and the rancher were to specialize in potatoes.
B) potatoes and the rancher were to specialize in meat.
C) neither good and the rancher were to specialize in both goods.
D) none of the above; they cannot both benefit by specialization and trade.

Question

Use the production possibilities data below to answer the following question(s). Table 2-3
 Refer to Table 2-3. The farmer and the rancher both could benefit if the farmer were to specialize in
A) meat and the rancher were to specialize in potatoes. 
B) potatoes and the rancher were to specialize in meat. 
C) neither good and the rancher were to specialize in both goods. 
D) none of the above; they cannot both benefit by specialization and trade.

Quizplus · Accepted Answer

According to the production possibilities data, the farmer has a comparative advantage in producing potatoes while the rancher has a comparative advantage in producing meat. If the farmer specializes in producing only potatoes and the rancher specializes in producing only meat, they can achieve a higher total output by trading with each other. This is because the opportunity cost of producing each good is lower for the individual who has a comparative advantage, and by specializing they can produce more of their respective goods and trade for the other good. Therefore, both the farmer and the rancher can benefit if the farmer specializes in potatoes and the rancher specializes in meat.

Use the Production Possibilities Data Below to Answer the Following