Asked by Bethany Cheek on Jul 21, 2024
Verified
Refer to Table 16.1. Use the following statements to answer this question. I. Trade between Mexico and Guatemala will allow Mexico to consume a combination of tomatoes and beer outside of Mexico's production possibilities frontier.
II) Trade between Mexico and Guatemala will allow Guatemala to consume a combination of tomatoes and beer outside of Guatemala's production possibilities frontier.
A) Both I and II are true.
B) I is true, and II is false.
C) I is false, and II is true.
D) Both I and II are false.
Production Possibilities Frontier
A graph showing all the possible highest production levels for two or more products, given certain inputs.
Trade
The act of buying, selling, or exchanging goods and services between people, firms, or countries.
Consumption Combination
The mix of goods and services that a consumer chooses to consume at a given time based on their preferences and budget.
- Assess the ramifications of trade for the optimization of production and consumption efficiencies.
Verified Answer
AC
Asisipho CenganiJul 22, 2024
Final Answer :
A
Explanation :
According to the table, Mexico has a comparative advantage in producing beer and Guatemala has a comparative advantage in producing tomatoes. Therefore, if they specialize in their comparative advantage and trade, they can consume a combination of tomatoes and beer outside of their respective production possibilities frontiers. This means that both statements I and II are true.
Learning Objectives
- Assess the ramifications of trade for the optimization of production and consumption efficiencies.