Chile and Argentina Each Produce Jellybeans and Peanut Butter, Using

question 175

Multiple Choice

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. Suppose that Chile and Argentina begin to trade with each other. 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

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Definitions:

Accounts Payable

The amount of money a company owes to its suppliers or creditors for goods and services purchased on credit.

Return On Assets

A financial ratio indicating how profitable a company is relative to its total assets, measuring efficiency in using assets to generate earnings.

Earnings Before Interest And Taxes

A financial metric indicating the profitability of a business before accounting for interest and tax expenses.

Excess Capacity

The situation in which a facility or operation can produce more than is being demanded by its customers.