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AP® Macroeconomics

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Opportunity Cost and Trade: New Zealand and Singapore

APMACR-C7ZFJI

New Zeal​and and Singapore can both produce either wool or computer chips. New Zealand's opportunity cost of one ton of wool is 97 computer chips. Singapore's opportunity cost of one ton of wool is 213 computer chips.

Based on this information, which of the following statements is/are true?

I. New Zealand has the comparative advantage in wool production
II. Singapore should specialize in computer chips
III. Both countries would benefit from trading one ton of wool for 145 computer chips.

A

I only

B

II only

C

I and II only

D

II and III only

E

I, II and III