Two countries Orange Row and Blue Violet produce only two go

Two countries, Orange Row and Blue Violet, produce only two goods: tea pots and coffee pots. The table gives their production possibilities. With specialization end trade, what are the quantities of tea pots and coffee pots that Orange Rose and Blue Violet produce?

Solution

For most of the possibilities,orange roses has less opportunity cost of producing tea pots than blue violet.For example: for second possibility-126/501=0.25 units of coffee pots than blue violet (251/501=0.50)

And for most of the possibilities,Blue violet has less opportunity costs of producing coffee pots than orange roses.

Hence orange will specialise in producing tea pots and produces 751 units of tea pots and 0 units of coffee pots.

And violet will specialise in producing coffee pots and produces 0 units of tea pots anf 751 units of coffee pots.