SCENARIO: CHILE AND ARGENTINA
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.
Reference: Ref 210
(Scenario: Chile and Argentina) Which of the following groups will benefit
From trade between Chile and Argentina?
A)Chilean consumers
B)Argentinean peanut butter producers
C)Argentinean consumers
D)Chilean consumers, Argentinean peanut butter producers, and Argentine consumers

Question

SCENARIO: CHILE AND ARGENTINA
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.
Reference: Ref 2­10
(Scenario: Chile and Argentina) Which of the following groups will benefit
From trade between Chile and Argentina?
A)Chilean consumers
B)Argentinean peanut butter producers
C)Argentinean consumers
D)Chilean consumers, Argentinean peanut butter producers, and Argentine consumers

Quizplus · Accepted Answer

Both countries have comparative advantages in producing one good over the other. Chile has a comparative advantage in producing jellybeans because it can produce 1 pound with 1 hour of labor while Argentina needs 1 hour of labor to produce 1 pound. Argentina has a comparative advantage in producing peanut butter because it can produce 1 pound with 3 hours of labor while Chile needs 2 hours of labor to produce 1 pound. By trading with each other, Chile can specialize in producing jellybeans and export them to Argentina, while Argentina can specialize in producing peanut butter and export it to Chile. This will lead to lower prices for both goods in both countries, benefiting Chilean consumers, Argentinean peanut butter producers, and Argentinean consumers.