products: potatoes and avocados. Assume each economy has the following production
capacities, in some unspecified units, if they employ half their resources on each.
Potato
Avocado
Idaho
100
50
California
100
100
Assume that within each economy resources are equally adaptable to either product (i.e.,
if you allocated all the resources to one product, you would get double the production).
Question 1: If each economy were to employ half their resources on potatoes and half on
avocados, how many units of each product would each produce, and how much of each
product would be produced in total (i.e., combining both economies)?
Potato
Idaho
California
Total
Avocado
Question 2A: What if we tried to take advantage of the Law of Comparative Advantage
and had economies specialize? Which economy should specialize in potato? Explain
why. You can be brief, but be precise (be careful to focus on opportunity cost).
Question 2B: Assuming we specialize, with all resources employed in each economy on
the product where it has a comparative advantage, how many units of each product
would be produced in each economy, and in total?
Idaho
California
Total
Potato
Avocado
