Suppose one unit of labor in England can produce either 20 units of cloth or 2 bottles of wine, while one unit of labor in Portugal can produce either 24 units of cloth or 12 bottles of wine. If England transfers 2 units of labor from wine to cloth and Portugal transfers 1 unit of labor from cloth to wine, the net increase in combined output will be:

Question

Quizplus · Accepted Answer

England gains 40 units of cloth (20 units per labor x 2 units) and loses 4 bottles of wine (2 bottles per labor x 2 units). Portugal gains 12 bottles of wine (12 bottles per labor x 1 unit) and loses 24 units of cloth (24 units per labor x 1 unit). The net change is a gain of 16 units of cloth (40 - 24) and 8 bottles of wine (12 - 4).

Suppose One Unit of Labor in England Can Produce Either