Question

There are two countries (Country A and Country B) that produce bluray disks and bags of microwave popcorn. Country A can produce either 100,000 bluray disks and 0 bags of popcorn per month, or 0 bluray disks and 200,000 bags of popcorn per month. Country B can produce either 80,000 bluray disks and 0 bags of popcorn per month, or 0 bluray disks and 80,000 bags of popcorn per month

F) Should Country A and B specialize in their production of goods? How should they specialize and why?

Answer 1

Answer
Yes, they should specialize on the basis of lower opportunity cost in the production.
The opportunity cost of production of x=max(production of y)/max(production of x)
Opportunity cost of Bluray disks for country A is
=200000/100000=2 bags of popcorns
Opportunity cost of Bluray disks for country B is
=80000/80000
=1 bag of popcorn
The opportunity cost of country B is lower so B produce Bluray disks and A produce Popcorns.

Why the specialize,

currently, without specialization, the total output is lower than the total world output after specialization.