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Figure: The Production Possibility Frontiers for Jackson and Tahoe
-(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. Each nation specializes completely, based on comparative advantage, and the price of 1 head of cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to Tahoe, then the new consumption point for Tahoe after trade is _____ bushels of wheat and _____head of cattle.

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Use the following to answer questions :
Figure: The Production Possibility Frontiers for Jackson and Tahoe 
-(Figure: The Production Possibility Frontiers for Jackson and Tahoe) Look at the figure The Production Possibility Frontiers for Jackson and Tahoe. In autarky, Jackson produces and consumes 30 head of cattle and 80 bushels of wheat, while Tahoe produces and consumes 80 head of cattle and 60 bushels of wheat. Each nation specializes completely, based on comparative advantage, and the price of 1 head of cattle equals the price of 2 bushels of wheat. If Jackson exports 120 bushels of wheat to Tahoe, then the new consumption point for Tahoe after trade is _____ bushels of wheat and _____head of cattle.

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Jackson exports 120 bushels of wheat to Tahoe, so Tahoe's consumption of wheat increases by 120 bushels. Since the price of 1 head of cattle equals the price of 2 bushels of wheat, Tahoe's consumption of cattle decreases by 120/2 = 60 head. Therefore, Tahoe's new consumption point is 120 bushels of wheat and 60 head of cattle.

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