Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1

Refer to Table 2-1. Which of the following is true?
A) Lebos has the comparative advantage in both goods.
B) Lebos has the comparative advantage in food.
C) Slavia has the comparative advantage in food.
D) It would be impossible for Lebos and Slavia to gain from trade.

Question

Use the production possibilities data below for Lebos and Slavia to answer the following question(s). Table 2-1
 
Refer to Table 2-1. Which of the following is true?
A) Lebos has the comparative advantage in both goods. 
B) Lebos has the comparative advantage in food. 
C) Slavia has the comparative advantage in food. 
D) It would be impossible for Lebos and Slavia to gain from trade.

Quizplus · Accepted Answer

Lebos has a lower opportunity cost of producing food than Slavia (1/2 < 2), meaning Lebos has a comparative advantage in producing food. Slavia has a lower opportunity cost of producing clothing than Lebos (1 < 2/3), meaning Slavia has a comparative advantage in producing clothing. Therefore, both countries can gain from trade if they specialize in producing the good they have a comparative advantage in and trade with each other.

Use the Production Possibilities Data Below for Lebos and Slavia