Use the figure below to answer the following questions.
Table 2.3.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers.
-Refer to Table 2.3.1.Each country gains from trade if
A)they both produce the goods in which they have an absolute advantage.
B)Vulcan specializes in good X and Romulus specializes in good Y.
C)Vulcan specializes in both goods.
D)Romulus specializes in both goods.
E)Romulus specializes in good X and Vulcan specializes in good Y.

Question

Use the figure below to answer the following questions.
Table 2.3.1
The planets of Vulcan and Romulus each produce goods X and Y.
The following table gives points on their production possibilities frontiers. 
-Refer to Table 2.3.1.Each country gains from trade if
A)they both produce the goods in which they have an absolute advantage. 
B)Vulcan specializes in good X and Romulus specializes in good Y. 
C)Vulcan specializes in both goods. 
D)Romulus specializes in both goods. 
E)Romulus specializes in good X and Vulcan specializes in good Y.

Quizplus · Accepted Answer

According to the production possibilities frontier, Romulus has an absolute advantage in producing good X and Vulcan has an absolute advantage in producing good Y. Therefore, they should specialize in the good in which they have an absolute advantage and trade with each other. Romulus should specialize in producing good X while Vulcan should specialize in producing good Y, which will allow them to attain a level of consumption that is beyond their own production possibilities frontiers. Hence, Romulus specializing in good X and Vulcan specializing in good Y is the best choice, which is option E.

Use the Figure Below to Answer the Following Questions