Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year,and a worker in Zenland can produce either 5 units of organic grain or 15 units of incense per year.There are 20 workers in Agland and 10 workers in Zenland.Currently the two countries do not trade.Agland produces and consumes 100 units of grain and 20 units of incense per year.Zenland produces and consumes 50 units of grain and no incense per year.If each country made the decision to specialize in producing the good in which it has a comparative advantage,then the combined yearly output of the two countries would increase by
A)30 units of grain and 100 units of incense.
B)30 units of grain and 150 units of incense.
C)50 units of grain and 90 units of incense.
D)50 units of grain and 130 units of incense.

Question

Quizplus · Accepted Answer

Agland has a comparative advantage in producing organic grain since it can produce 10 units per worker as compared to Zenland's 5 units per worker. Zenland has a comparative advantage in producing incense since it can produce 15 units per worker as compared to Agland's 2 units per worker.

If Agland specializes in producing organic grain, it can produce 200 units (20 workers x 10 units per worker) of grain per year. If Zenland specializes in producing incense, it can produce 150 units (10 workers x 15 units per worker) of incense per year.

Thus, after specialization, the combined output would be 250 units of grain (100 from Agland and 150 from Zenland) and 170 units of incense (20 from Agland and 150 from Zenland).

Therefore, the combined yearly output of the two countries would increase by 50 units of grain and 130 units of incense, which is option D.

Suppose That a Worker in Agland Can Produce Either 10