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

Refer to Table 2-1. According to the law of comparative advantage, both Lebos and Slavia could gain if
A) Lebos produced all of the food and clothing and Slavia did not produce anything.
B) Lebos specialized in producing clothing, Slavia specialized in producing food, and they traded.
C) Lebos specialized in producing food, Slavia specialized in producing clothing, and they traded.
D) Slavia and Lebos were both were self-sufficient and did not 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. According to the law of comparative advantage, both Lebos and Slavia could gain if
A) Lebos produced all of the food and clothing and Slavia did not produce anything. 
B) Lebos specialized in producing clothing, Slavia specialized in producing food, and they traded. 
C) Lebos specialized in producing food, Slavia specialized in producing clothing, and they traded. 
D) Slavia and Lebos were both were self-sufficient and did not trade.

Quizplus · Accepted Answer

According to the law of comparative advantage, it is beneficial for countries to specialize in producing the good for which they have a lower opportunity cost and then trade with other countries for the other good. In this case, Lebos has a lower opportunity cost for producing food and Slavia has a lower opportunity cost for producing clothing. Therefore, if Lebos specializes in producing food and Slavia specializes in producing clothing, and they trade, both countries can gain from the exchange.

Use the Production Possibilities Data Below for Lebos and Slavia