Table 13.6
Production and
Consumption Production
Without Trade With Trade Denmark and Belize can produce both clocks and hats.Table 13.6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 13.6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many clocks will Belize consume?
A)150
B)270
C)930
D)1200

Question

Table 13.6
Production and
Consumption Production
Without Trade With Trade  Denmark and Belize can produce both clocks and hats.Table 13.6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 13.6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded, how many clocks will Belize consume?
A)150 
B)270 
C)930 
D)1200

Quizplus · Accepted Answer

According to the terms of trade, 1 hat is worth 1.8 clocks. Therefore, if 150 hats are traded, Belize will receive 150 x 1.8 = 270 clocks. Since Belize produces 330 clocks and consumes 300 clocks without trade, and then produces 500 clocks with trade, it can consume a total of 770 clocks. Therefore, after trade, Belize can consume an additional 270 clocks (770 - 500 = 270).

Table 13.6 Production and