The following table indicates the production possibilities of food and clothing per worker day in the United States and South Korea.

Which of the following is true?
A)Mutual gains could be realized if the United States specialized in producing food and South Korea in producing clothing.
B)Mutual gains could be realized if the United States specialized in clothing production and South Korea in food production.
C)South Korean workers are the high-cost producers of clothing.
D)None of the above are true.

Question

The following table indicates the production possibilities of food and clothing per worker day in the United States and South Korea.

Which of the following is true?
A)Mutual gains could be realized if the United States specialized in producing food and South Korea in producing clothing. 
B)Mutual gains could be realized if the United States specialized in clothing production and South Korea in food production. 
C)South Korean workers are the high-cost producers of clothing. 
D)None of the above are true.

Quizplus · Accepted Answer

Looking at the table, we can see that the United States has a comparative advantage in producing food while South Korea has a comparative advantage in producing clothing. Therefore, if the two countries specialize in producing the good they are relatively more efficient in, and trade with each other, they can both achieve a higher level of production and consumption, leading to mutual gains.

The Following Table Indicates the Production Possibilities of Food and Clothing