Final answer:
Gamma has a comparative advantage in shoe production if its opportunity cost in terms of dresses is lower than Delta's, meaning Gamma sacrifices less in dress production for each pair of shoes made.
Step-by-step explanation:
The nation of Gamma has a comparative advantage in the production of shoes if its domestic opportunity cost of producing shoes in terms of dresses is lower than Delta's.
This means that for every pair of shoes Gamma produces, it gives up less production of dresses compared to what Delta would give up.
Comparative advantage exemplifies a scenario where a country can produce a good at a lower opportunity cost than another country.
It does not necessarily mean that Gamma uses fewer resources than Delta or that it has a greater supply or wealth. What matters is the opportunity cost expressed in terms of foregone alternatives.
When Gamma and Delta each transfer labor toward their respective areas of comparative advantage, and trade accordingly, they both can end up consuming more of both goods.
For instance, if the United States (presumed to be Gamma) shifts workers from shoe production to refrigerators, it reduces shoe output but significantly increases refrigerator production.
Conversely, when Mexico (presumed to be Delta) moves workers towards shoe production and away from refrigerators, it increases its shoe output and decreases its refrigerator output.
Although there is a loss in one commodity, the increase in production of another commodity more than compensates, leading to an overall increase in combined production.
International trade allows both countries to enjoy higher levels of consumption than they could individually without trade.