Assume that two countries (Home and Foreign) each produce two goods (corn and wheat) under constant cost production. Home produces 0.5 ton of corn or 1 ton of wheat with a day of labor. Without trade (in autarky), Home's daily production is 20 tons of wheat and 10 tons of corn. How large is Home's labor force?
A) 50 workers
B) 40 workers
C) 30 workers
D) 20 workers

Question

Quizplus · Accepted Answer

Let L be the number of workers in Home. 
Per worker, Home produces: 
- 0.5 ton of corn or 
- 1 ton of wheat.

In autarky, Home produces 10 corn + 20 wheat = 30 output units in total. 
This means that the amount of labor needed in Home is:

30 output units / (0.5 corn/day + 1 wheat/day) per worker = 
30 output units / (1.5 output units/day per worker) = 
20 workers.

Assume That Two Countries (Home and Foreign) Each Produce Two