Question

Greece can produce either 100 bushels of oranges or 20 bushels of tomatoes using all of its available resources, and Turkey can produce either 40 bushels of oranges or 30 bushels of tomatoes using all of its available resources. How many bushels of oranges will Greece produce after specialization and trade, assuming that each country fully specializes in the good in which it has a comparative advantage

Answer 1

Answer:

100 bushels of oranges

Explanation:

A country has comparative advantage in production if it produces at a lower opportunity cost when compared to other countries.

for Greece

opportunity cost of producing oranges = 20 / 100 = 0.2

opportunity cost of producing tomatoes = 100/ 20 = 5

For turkey

opportunity cost of producing oranges = 30 / 40 = 0.75

opportunity cost of producing tomatoes = 40 / 30 = 1.33

Greece has a comparative advantage in the production of oranges. If it specialises in the production of oranges, it would produce 100 bushels