Use the table below to answer the following question. The table outlines the production possibilities for two hypothetical countries.
Redland | Blueland | ||
Mutton | Oats | Mutton | Oats |
(tons) | (millions of bushels) | (tons) | (millions of bushels) |
0 | 8 | 0 | 8 |
4 | 6 | 3 | 6 |
8 | 4 | 6 | 4 |
12 | 2 | 9 | 2 |
16 | 0 | 12 | 0 |
Which of the following statements is true?
a. Redland has a comparative advantage in producing oats.
b. Redland enjoys a comparative advantage in producing both products and could not gain from exchange.
c. Redland should specialize in producing mutton and should trade for oats.
d. In this example, Blueland has nothing to gain through trade with Redland.
Ans: c. Redland should specialize in producing mutton and should trade for oats.
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