SCENARIO: CHILE AND ARGENTINA

question 15

Multiple Choice

SCENARIO: CHILE AND ARGENTINA
Chile and Argentina each produce jellybeans and peanut butter, using
Labor as their only resource.Each country has 1,000 hours of labor.In
Chile, an hour produces a pound of jellybeans and 2 hours produce a
Pound of peanut butter.In Argentina, an hour produces a pound of
Jellybeans and 3 hours produces a pound of peanut butter.When they do
Not trade with each other, Chile consumes 600 pounds of jellybeans and
200 pounds of peanut butter, and Argentina consumes 400 pounds of
Jellybeans and 200 pounds of peanut butter.
Reference: Ref 2­10
(Scenario: Chile and Argentina) Suppose that Chile and Argentina begin
To trade with one another.Each completely specializes in the product in
Which it finds its comparative advantage.How many pounds of peanut
Butter and jellybeans do the two countries jointly produce?

• A)1,000 pounds of jellybeans and 400 pounds of peanut butter
• B)1,000 pounds of jellybeans and 500 pounds of peanut butter
• C)500 pounds of jellybeans and 1,000 pounds of peanut butter
• D)333.33 pounds of jellybeans and 500 pounds of peanut butter

---

Definitions:

Returns to Scale

The rate at which output increases as inputs are increased proportionally in the production process.

Scale of Production

The level at which a production process is operating, ranging from small to large scale based on output volume and capacity.

Economies of Scale

Cost advantages that enterprises obtain due to their scale of operation, with cost per unit of output decreasing with increasing scale.

Average Total Cost

The total cost of production divided by the total quantity produced, indicating the per unit cost of production.