Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate.
-Refer to Table 3-30. Varick has a comparative advantage in the production of
A)wheat.
B)cloth.
C)both goods.
D)neither good.

Question

Table 3-30
Assume that Falda and Varick can switch between producing wheat and producing cloth at a constant rate. 
-Refer to Table 3-30. Varick has a comparative advantage in the production of
A)wheat. 
B)cloth. 
C)both goods. 
D)neither good.

Quizplus · Accepted Answer

Varick has a lower opportunity cost in producing cloth compared to Falda. Specifically, Varick gives up 1.5 units of wheat to produce 1 unit of cloth, while Falda gives up 2 units of wheat to produce 1 unit of cloth. Therefore, Varick should specialize in producing cloth and trade with Falda for wheat.

Table 3-30 Assume That Falda and Varick Can Switch Between Producing Wheat