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Unformatted text preview: 0.5 __ liters of milk. B. Bosnia has a comparative advantage in __ Wool __ production. C. True or False: Bosnia's economic productive capacity exceeds Albania's. TRUE If Bosnia and Albania specialize appropriately and then trade, the PPCs in both countries will shift out. FALSE An individual, firm, or nation must be able to produce more of a good or service before it can have a comparative advantage in that good or service. FALSE Problem 4 An economy has two kinds of resources. One kind can produce tea (R) but nothing else. The other can produce sugar (S), but nothing else. Draw this economys production possibilities set and locate the points in the set which are Pareto efficient in production. Table A Albania Bosnia Comb. Milk Wool Milk Wool A B C D E 0 25 50 75 100 200 150 100 50 0 0 25 50 75 100 300 225 150 75 0 T S Only Pareto Efficient Point...
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- Spring '08