Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year,and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.Each nation has 10 workers.For many years the two countries traded,each completely specializing according to their respective comparative advantages.Now,however,war has broken out between them and all trade has stopped.Without trade,Freedonia produces and consumes 30 units of corn and 10 units of wheat per year.Sylvania produces and consumes 10 units of corn and 30 units of wheat.The war has caused the combined yearly output of the two countries to decline by
A)10 units of corn and 10 units of wheat.
B)20 units of corn and 20 units of wheat.
C)30 units of corn and 30 units of wheat.
D)40 units of corn and 40 units of wheat.

Question

Quizplus · Accepted Answer

With trade, Freedonia would specialize in producing corn and Sylvania in producing wheat. Freedonia would produce 60 units of corn and 20 units of wheat, while Sylvania would produce 20 units of corn and 60 units of wheat. Without trade, both countries have to produce for themselves, resulting in a decrease of 20 units of corn and 20 units of wheat for both countries (the difference between their specialized production and their self-sufficient production). Therefore, the combined yearly output has declined by 20 units of corn and 20 units of wheat.

Suppose That a Worker in Freedonia Can Produce Either 6