Suppose John and Joe each have different production possibility frontiers; John specializes in cloth and Joe specializes in corn.John's island unexpectedly has exceptionally good weather, and suddenly he is twice as productive in the production of both corn and cloth.Select the best statement.
A)As a result, John will have an absolute advantage in both corn and cloth.
B)There will be a change to the goods in which John and Joe specialize, because John's opportunity cost of corn has decreased.
C)As a result, it is possible that John and Joe will switch the goods in which they specialize.
D)There will be no change to the goods in which John and Joe specialize, because John's comparative advantage has not changed.
E)This is an example of unemployed resources becoming employed.

Question

Quizplus · Accepted Answer

John's productivity in both corn and cloth doubling does not alter the ratio of his production capabilities between the two goods, meaning his comparative advantage remains the same. Comparative advantage, not absolute advantage, determines specialization in trade.

Suppose John and Joe Each Have Different Production Possibility Frontiers;