Portugal specializes in the production of wine and produces 10 million bottles. The United Kingdom specializes in the production of cheese and produces 100 million pounds of cheese. If the terms of trade is 10 pounds of cheese for a bottle of wine and Portugal consumes 3 million bottles of wine, then the UK consumes _____ million pounds of cheese, and Portugal consumes _____ million pounds of cheese.

Question

Quizplus · Accepted Answer

Portugal consumes 3 million bottles of wine, which means it has 7 million bottles left (10 million produced - 3 million consumed). At the terms of trade of 10 pounds of cheese for a bottle of wine, Portugal can trade its 7 million bottles for 70 million pounds of cheese. Therefore, Portugal consumes 70 million pounds of cheese. The UK, trading 70 million pounds of cheese for 7 million bottles of wine, consumes the remaining 30 million pounds of cheese (100 million produced - 70 million traded).

Portugal Specializes in the Production of Wine and Produces 10