Consider the following weekly production possibilities of gloves and hats in Panama and Russia:?RussiaPanamaGloves20180Hats80 90What is each country's opportunity cost of producing gloves and hats? If the countries could, should they trade?
What will be an ideal response?
Russia's opportunity cost of a glove is 4 hats, while Panama's opportunity cost of a glove is 1/2 of a hat. The opportunity costs of hats are the reciprocals of these. Even though Panama has an absolute advantage in the production of all goods, it will still make sense for Panama to specialize in glove production (because of its comparative advantage) and trade for hats, as Russia has the comparative advantage in hat production.
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Indicate whether the statement is true or false
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