Question 18 igure 3-7 airyland's Production Possibilities Frontier 10 Toups 10 Icups 9 8 7 6 m 2 1 2 3 4 5 6 7 8 dow's 1 2 3 4 5 6 7 efer to Figure...

Figure 3-7

Refer to Figure 3-7. According to the theory of comparative advantage, in which of the following scenarios would there be no gains from trade available for Fairyland and Merrywood?

1-If the opportunity cost of 1 bowl for Merrywood was 4 cups. (The production possibility frontier for Merrywood would look different; it would have the same slope as the production possibility frontier for Fairyland)

2-If the opportunity cost of 1 bowl for Merrywood was larger than the opportunity cost of 1 bowl for Fairyland. (The production possibilities frontier for Merrywood would look different; it would have a different slope.)       

3-If Fairyland had an absolute advantage in the production of both goods.

4-There would always be gains from trade for Fairyland and Merrywood

Question 18igure 3-7airyland's Production Possibilities Frontier10Toups10Icups9876m21 2345 678dow's1 2 3 45 6 7efer to Figure 3-7. According to the theory of comparativend Mo