Suppose That a Worker in Cornland Can Grow Either 40

question 28

Multiple Choice

Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, by what amount will the combined output for the two countries increase?

• A) 200 bushels of corn and 200 bushels of oats
• B) 350 bushels of corn and 400 bushels of oats
• C) 400 bushels of corn and 500 bushels of oats
• D) 800 bushels of corn and 1000 bushels of oats

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Definitions:

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The amount by which the quantity demanded of a product exceeds the quantity supplied at a particular (below-equilibrium) price.