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The table below shows the number of bushels of grapes or bushels of tomatoes that France and
Italy can produce in one day using the same amount of resources.
France bushels of Grapes: 100
France bushels of Tomatoes: 25
Italy bushels of Grapes: 100
Italy bushels of Tomatoes: 50
(a) Does France, Italy, or neither nation have a comparative advantage in producing grapes?
Explain.
(b) Assume France and Italy decide to specialize and trade according to their comparative
advantages, and 20 bushels of grapes are exchanged for 8 bushels of tomatoes. Are specialization
and trade under these terms beneficial to both France and Italy? Explain.
(c) Suppose the productivity of labor in the production of grapes and tomatoes in France doubles.
Assuming France experiences constant opportunity cost in the production of the two products,
draw a correctly labeled graph of France's production possibilities curve, with grapes on the
horizontal axis and tomatoes on the vertical axis. Plot the numerical values on the graph and
show the effect of doubling labor productivity.
(d) Will the doubling of labor productivity in France change France's absolute advantage, change
its comparative advantage, or change neither? Explain.