Suppose that a worker in Country A can produce either 25 bananas or 5 tomatoes each year. Country A has 200 workers. Suppose a worker in Country B can produce either 18 bananas or 6 tomatoes each year. Country B has 400 workers. Country A specializes in producing bananas and Country B specializes in producing tomatoes. Regarding the terms of trade, Country A will give no _____ than _____ for every _____.
A) more; 5 bananas; one tomato
B) less; 5 bananas; one tomato
C) more; 1 tomato; 5 bananas
D) less; 1 tomato; 5 bananas

Question

Quizplus · Accepted Answer

Country A's opportunity cost of producing 1 tomato is 5 bananas (25 bananas/5 tomatoes). Therefore, Country A will give no more than 5 bananas for every 1 tomato in trade.

Suppose That a Worker in Country a Can Produce Either