In a single year,Argentina can raise 100 tons of beef or produce 1,000 boxes of tulips.In the same growing season,Venezuela can raise 50 tons of beef or produce 750 boxes of tulips.When the two countries begin trading beef for tulips,we expect the total surplus from beef consumption and production to:

Question

Quizplus · Accepted Answer

Since Argentina has a comparative advantage in producing beef (they can produce more beef per unit of resources than Venezuela can), they will specialize in beef production and export it to Venezuela in exchange for tulips. As a result, the demand for Argentine beef will increase, raising the price and increasing the surplus from beef production and consumption in Argentina. However, we cannot make a definitive prediction about Venezuela's total surplus, as it depends on the terms of trade (i.e. the exchange ratio between beef and tulips) and the relative strength of comparative advantages.

In a Single Year,Argentina Can Raise 100 Tons of Beef