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Two nations, Mars and Venus, each produce food and clothing. The table gives points on each nationâs PPF. The asterisks indicate their current point of production. Which of the following statementsis correct based on the concept of comparative advantage?

Mars Venus
Food Clothing Food Clothing
0 30 0 40
2 24 4 32
4 18 8 24
5 12 12 16
8 6 16 8
10 0 20 0

a. Mars and Venus should continue producing the quantities indicated by the asterisks.
b. Mars should specialize in the production of food.
c. Mars should specialize in the production of clothing.
d.Venus has the comparative advantage in clothing.
e. Mars has an absolute advantage in the production of food.

Respuesta :

Answer:

The correct option is;

c. Mars should specialize in the production of clothing

Explanation:

The given table can be presented as follows;

Mars[tex]{}[/tex]                                                                          [tex]{}[/tex]Venus

Food [tex]{}[/tex] Clothing                                                                 Food [tex]{}[/tex] Clothing

0 [tex]{}[/tex]         30                                                                         0    [tex]{}[/tex]      40

2    [tex]{}[/tex]       24                                                                         4    [tex]{}[/tex]      32

4        [tex]{}[/tex]   18                                                                          8      [tex]{}[/tex]    24

5   [tex]{}[/tex]         12                                                                        12   [tex]{}[/tex]      16

8     [tex]{}[/tex]        6                                                                         16          8

10            0                                                                         20 [tex]{}[/tex]        0

From the attached chart as produced in Excel, the trend lines and their equation for Mars and Venus can be seen

The relationship between Clothing, y and Food, x production for Mars is given as follows;

y = -3·x + 30

The relationship between Clothing, y and Food, x production for Venus is given as follows;

y = -2·x + 40

Therefore since a given decrease in food production results in a higher increase in Cloth production for Mars than for Venus, Mars should specialize in the production of clothing.

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