The Figure Below Shows Production Possibilities Curves for Tomatoes and Oranges

question 158

Multiple Choice

The figure below shows production possibilities curves for tomatoes and oranges in two prefectures in a country.

-Refer to the figure above. Suppose that Prefecture A produces at point Y, while Prefecture B produces at point Z. Could there be gains from trade (Prefecture A sells oranges to Prefecture B, and Prefecture B sells tomatoes to Prefecture B) ? Why or why not?

• A) Yes, because Prefecture A has a comparative advantage in orange production up to 800 million pounds while Prefecture B has a comparative advantage in tomato production beyond 1 billion pounds.
• B) Yes, because Prefecture A produces more oranges while Prefecture B produces more tomatoes.
• C) No, because Prefecture A's opportunity cost of producing additional pound of tomatoes at W is higher than Prefecture B's opportunity cost at X.
• D) No, because Prefecture A's opportunity cost of producing additional pound of oranges at W is higher than Prefecture B's opportunity cost at X.

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