Assume the following information:
If the two countries specialize in the production of that commodity in which they have a comparative advantage, and trade their surplus at a price of 1.5 bushels of grain for one bolt of cloth, how many bushels of grain and bolts of cloth will be consumed by Country B? Assume that the increase in grain output will be shared equally by both countries.
A) 5,600 bushels of grain and 1,933 bolts of cloth
B) 2,900 bushels of grain and 1,500 bolts of cloth
C) 2,900 bushels of grain and 1,567 bolts of cloth
D) 2,700 bushels of grain and 1,700 bolts of cloth
E) None of the above.
Correct Answer:
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