Table 3-1

-Refer to Table 3-1.The farmer and the rancher both could benefit if the farmer were to specialize in
A)meat and the rancher were to specialize in potatoes.
B)potatoes and the rancher were to specialize in meat.
C)neither good and the rancher were to specialize in both goods.
D)none of the above; they cannot both benefit by specialization and trade.

Question

Table 3-1
 
-Refer to Table 3-1.The farmer and the rancher both could benefit if the farmer were to specialize in
A)meat and the rancher were to specialize in potatoes. 
B)potatoes and the rancher were to specialize in meat. 
C)neither good and the rancher were to specialize in both goods. 
D)none of the above; they cannot both benefit by specialization and trade.

Quizplus · Accepted Answer

According to the table, the farmer has a comparative advantage in producing potatoes (he can produce 20 potatoes or 5 meats, compared to the rancher who can produce 10 potatoes or 2 meats with the same amount of resources). On the other hand, the rancher has a comparative advantage in producing meat. Therefore, if the farmer specializes in producing potatoes and the rancher specializes in producing meat, they can both benefit from trade. The farmer can trade some of his potatoes for the rancher's meat, and vice versa, resulting in a higher total output and both parties being better off.

Table 3-1 -Refer to Table 3-1.The Farmer and the Rancher Both Could