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 W, while Prefecture B produces at point X. Could there be gains from trade (Prefecture A sells tomatoes to Prefecture B, and Prefecture B sells oranges to Prefecture B) ? Why or why not?
A) Yes, because Prefecture A has a comparative advantage in tomato production beyond 1 billion pounds while Prefecture B has a comparative advantage in orange production beyond 800 million pounds.
B) Yes, because Prefecture A produces more tomatoes while Prefecture B produces more oranges.
C) No, because Prefecture A's opportunity cost of producing additional pounds 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.
Correct Answer:

Verified
Correct Answer:
Verified
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