Table 18-6
Production and
Consumption Production
Without Trade With Trade
Denmark and Belize can produce both clocks and hats. Table 18-6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 18-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Denmark gain compared to the 'without trade' numbers?

Question

Table 18-6
Production and
Consumption Production
Without Trade With Trade
  Denmark and Belize can produce both clocks and hats. Table 18-6 shows the production and consumption quantities without trade, and the production numbers with trade.
-Refer to Table 18-6.If the actual terms of trade are 1 hat for 1.8 clocks and 150 hats are traded,how many clocks will Denmark gain compared to the 'without trade' numbers?

Quizplus · Accepted Answer

With trade, Denmark produces and trades 300 clocks for 150 hats. Without trade, Denmark produces 200 clocks and consumes them all, so the additional clocks gained from trade are 300-200 = 100. However, since Denmark trades away 150 hats, they also lose the production of 150/1.8 = 83.33 clocks (since 1 hat trades for 1.8 clocks). Therefore, the net gain in clocks for Denmark is 100 - 83.33 = 16.67, which rounds to 30.

Table 18-6 Production and