The diagram shows the linear Production Possibility Frontiers (PPFs) for two countries, Alpha and Beta, which produce only two goods: Wheat (WWW) and Microchips (MMM), using the same total amount of resources.
Which of the following statements regarding specialisation, comparative advantage, and the terms of trade is correct?
Alpha has a comparative advantage in Wheat and would benefit from trading 1 unit of Wheat for 3 Microchips with Beta.
Beta has an absolute advantage in both goods and therefore cannot benefit from specialisation and trade with Alpha.
Beta has a comparative advantage in Wheat, and the mutually beneficial terms of trade for 1 unit of Wheat must be between 0.25 and 0.5 Microchips.
Alpha should specialise completely in Microchips because its opportunity cost of producing 1 Microchip (0.5 units of Wheat) is lower than Beta's (0.25 units of Wheat).