Asked by Isabelle Manaytay on Apr 28, 2024
Verified
Refer to Table 20.1. Before specialization, Mexico produces 160 bushels of oranges and 40 bushels of bananas, and Guatemala produces 30 bushels of oranges and 40 bushels of bananas. After specialization, the increase in banana production is
A) 10 bushels of bananas.
B) 15 bushels of bananas.
C) 20 bushels of bananas.
D) 40 bushels of bananas.
Opportunity Cost
The loss of potential gain from other alternatives when one alternative is chosen; the value of the next best alternative foregone.
Specialization
The process of focusing on and becoming expert in a particular subject or skill.
Production
The process of creating goods and services by combining labor, land, and capital to generate output.
- Discern the rewards of specialization and trade for nations involved in such processes.
Verified Answer
ZK
Zybrea KnightMay 04, 2024
Final Answer :
C
Explanation :
Before specialization, Mexico and Guatemala together produce 40 (Mexico) + 40 (Guatemala) = 80 bushels of bananas. After specialization, Mexico should specialize in oranges (where it has a higher production capacity) and Guatemala in bananas (where it has a comparative advantage). Looking at the maximum production after specialization, Mexico would produce 0 bananas, and Guatemala would produce 100 bananas. The increase in banana production after specialization is 100 - 80 = 20 bushels of bananas.
Learning Objectives
- Discern the rewards of specialization and trade for nations involved in such processes.
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