If the USA could produce 1 ton of potatoes or 0.5 tons of wheat per worker per year, while Ireland could produce 3 tons of potatoes or 2 tons of wheat per worker per year, there can be mutual gains from trade if:

This question is incomplete because the options are missing; here are the options:

A. The USA specializes in potatoes because of its comparative advantage in producing potatoes.

B. The USA specializes in wheat because of its absolute advantage in producing wheat.

C. The USA specializes in wheat because of its comparative advantage in producing wheat.

D. There can be no mutual gains from trade.

The correct answer to this question is A. The USA specializes in potatoes because of its comparative advantage in producing potatoes.

Explanation:

In economics, a country has a comparative advantage, if it can produce a specific good at a lower opportunity cost, which implies the loss of choosing the product over others is low. Also, mutual gains are possible if each country specializes in the product with a comparative advantage. Moreover, to know which country has an opportunity advantage you need to calculate the opportunity cost of 1 unit, or, in this case, 1 ton of the product.

In the case of the U.S. you already know 1 ton of potatoes is equivalent to 0.5 tons of wheat, which is the opportunity cost. Now, let's calculate this factor for the production of 1 ton of potatoes in Ireland

3 tons of potatoes = 2 tons of wheat 1. Use 3 (tons of potatoes) and divide both numbers into three

3 tons of potatoes/ 3 = 2 tons of wheat / 3

1 ton of potatoes = 0.66

This shows the opportunity cost in the USA is lower and this represents a comparative advantage as less is lost when potatoes are chosen over wheat. Thus, to benefit both countries the USA should specialize in potatoes due to the higher comparative advantage or lower opportunity cost.

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