Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day.
-Refer to Table 3-21. Jamaica and Norway would not be able to gain from trade if Norway's opportunity cost of one radio changed to
A)0 coolers.
B)1 cooler.
C)2 coolers.
D)Jamaica and Norway can always gain from trade regardless of their opportunity costs.

Question

Table 3-21
Assume that Jamaica and Norway can switch between producing coolers and producing radios at a constant rate. The following table shows the number of coolers or number of radios each country can produce in one day. 
-Refer to Table 3-21. Jamaica and Norway would not be able to gain from trade if Norway's opportunity cost of one radio changed to
A)0 coolers. 
B)1 cooler. 
C)2 coolers. 
D)Jamaica and Norway can always gain from trade regardless of their opportunity costs.

Quizplus · Accepted Answer

If Norway's opportunity cost of one radio changed to 2 coolers, they would no longer have a comparative advantage in producing radios. In this case, the opportunity cost of producing one radio in Norway would be two coolers, while Jamaica's opportunity cost of producing one radio would still be one cooler. Therefore, Jamaica would have a comparative advantage in producing radios, and Norway would have a comparative advantage in producing coolers. This means that if they each specialize in producing the good in which they have a comparative advantage and then trade with each other, they will both be able to consume a combination of goods outside of their production possibilities frontier, resulting in gains from trade. Therefore, if Norway's opportunity cost of one radio changes to 2 coolers, they would not be able to gain from trade, and the answer is C.

Table 3-21 Assume That Jamaica and Norway Can Switch Between Producing Coolers