Suppose That a Worker in Agland Can Produce Either 10

question 49

Multiple Choice

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year.There are 10 workers in Agland and 20 workers in Zenland.Currently the two countries do not trade.Agland produces and consumes 50 units of grain and 10 units of incense per year.Zenland produces and consumes 100 units of grain and no incense per year.The combined output of the two countries is therefore 150 units of grain and 10 units of incense per year.If the two countries decided to trade and completely specialize in producing the good for which each has a comparative advantage,what would the combined yearly output of the two countries be

• A)50 units of grain and 40 units of incense
• B)200 units of grain and 150 units of incense
• C)150 units of grain and 20 units of incense
• D)100 units of grain and 300 units of incense

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Definitions:

Agricultural Produce

The harvested product of the entity’s biological assets.

Biological Assets

Living plants or animals that are used in agricultural production or held for sale, breeding, or other purposes, which can provide economic benefits to their owners.

AASB 141

An Australian accounting standard that covers the agricultural sector, detailing the accounting for agricultural activity including the recognition and measurement of biological assets and agricultural produce.

IAS 41

An international accounting standard that prescribes the accounting treatment and reporting of agricultural activity.