Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 20 workers in Cornland and 20 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 400 bushels of corn and 100 bushels of oats, while Oatland will produce and consume 50 bushels of corn and 500 bushels of oats. Combined output for the two countries would therefore be 450 bushels of corn and 600 bushels of oats. If the two countries do trade, each will completely specialize in producing the crop for which it has a comparative advantage. If trade occurs, by what amount will the combined output for the two countries increase?
A)800 bushels of corn and 1000 bushels of oats.
B)400 bushels of corn and 500 bushels of oats.
C)350 bushels of corn and 400 bushels of oats.
D)There would not be any increase.

Question

Quizplus · Accepted Answer

Under the scenario of no trade, the combined output is 450 bushels of corn and 600 bushels of oats. However, if trade occurs and each country specializes in producing the crop for which it has a comparative advantage, Cornland will produce only corn and Oatland will produce only oats. In this situation, Cornland will produce 800 bushels of corn (20 workers x 40 bushels each) and Oatland will produce 1000 bushels of oats (20 workers x 50 bushels each). Therefore, the combined output will be 800 bushels of corn and 1000 bushels of oats, which is an increase of 350 bushels of corn and 400 bushels of oats compared to the scenario of no trade. Thus, the answer is C.

Suppose That a Worker in Cornland Can Grow Either 40