Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
Alice's Production Possibilities Frontier
Betty's Production Possibilities Frontier
-Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?
A)Alice produces more pizzas and Betty produces more lemonade.
B)Alice produces more lemonade and Betty produces more pizzas.
C)Both Alice and Betty produce only pizzas.
D)There are no circumstances under which both Alice and Betty can benefit from specialization and trade.

Question

Figure 3-10
Alice and Betty's Production Possibilities in one 8-hour day.
Alice's Production Possibilities Frontier
Betty's Production Possibilities Frontier  
-Refer to Figure 3-10.If point A represents Alice's current production and point B represents Betty's current production,under what circumstances can both Alice and Betty benefit from specialization and trade?
A)Alice produces more pizzas and Betty produces more lemonade. 
B)Alice produces more lemonade and Betty produces more pizzas. 
C)Both Alice and Betty produce only pizzas. 
D)There are no circumstances under which both Alice and Betty can benefit from specialization and trade.

Quizplus · Accepted Answer

If Alice specializes in producing more lemonade and Betty specializes in producing more pizzas, both of them can produce more of their specialized good than they could if they tried to produce both goods. By trading some of their specialized good with each other, they can both end up with more of both goods than they started with. Therefore, both Alice and Betty can benefit from specialization and trade if Alice produces more lemonade and Betty produces more pizzas.

Figure 3-10 Alice and Betty's Production Possibilities in One 8-Hour Day