Suppose That a Worker in Boatland Can Produce Either 5

question 2

Multiple Choice

Suppose that a worker in Boatland can produce either 5 units of wheat or 25 units of fish per year,and a worker in Farmland can produce either 25 units of wheat or 5 units of fish per year.There are 10 workers in each country.Political pressure from the fish lobby in Farmland and from the wheat lobby in Boatland has prevented trade between the two countries on the grounds that cheap imports would kill the fish industry in Farmland and the wheat industry in Boatland.As a result,Boatland produces and consumes 25 units of wheat and 125 units of fish per year while Farmland produces and consumes 125 units of wheat and 25 units of fish per year.If the political pressure were overcome and trade were to occur,each country would completely specialize in the product in which it has a comparative advantage.If trade were to occur,the combined output of the two countries would increase by

• A)25 units of wheat and 25 units of fish.
• B)50 units of wheat and 50 units of fish.
• C)75 units of wheat and 75 units of fish.
• D)100 units of wheat and 100 units of fish.

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Definitions:

Monopolistic Competition

Market in which firms can enter freely, each producing its own brand or version of a differentiated product.

Monopoly

A market structure characterized by a single seller controlling the entire supply of a unique product or service, without close substitutes.

Differentiated Products

Goods or services that are distinguished from similar products by characteristics like quality, features, or brand identity, leading to non-price competition.

Monopolistically Competitive

A market structure in which many firms sell products or services that are similar but not identical, allowing for competition on factors other than price.