Suppose that a worker in Cornland can grow either 40 bushels of corn or 10 bushels of oats per year, and a worker in Oatland can grow either 5 bushels of corn or 50 bushels of oats per year. There are 30 workers in Cornland and 30 workers in Oatland. If the two countries do not trade, Cornland will produce and consume 600 bushels of corn and 150 bushels of oats, while Oatland will produce and consume 20 bushels of corn and 1300 bushels of oats. 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)1200 bushels of corn and 50 bushels of oats.
B)580 bushels of corn and 50 bushels of oats.
C)50 bushels of corn and 580 bushels of oats.
D)580 bushels of corn and 1500 bushels of oats.

Question

Quizplus · Accepted Answer

Cornland has a comparative advantage in producing corn because it can produce corn at a ratio of 40 bushels per worker compared to Oatland's 5 bushels per worker. Oatland has a comparative advantage in producing oats because it can produce oats at a ratio of 50 bushels per worker compared to Cornland's 10 bushels per worker. If both countries specialize according to their comparative advantages, Cornland would produce 40 bushels of corn * 30 workers = 1200 bushels of corn (an increase of 600 bushels from its initial production without trade), and Oatland would produce 50 bushels of oats * 30 workers = 1500 bushels of oats (an increase of 200 bushels from its initial production without trade). The combined increase in yearly output would be 600 bushels of corn (1200-600) and 200 bushels of oats (1500-1300), totaling 580 bushels of corn and 50 bushels of oats when considering the initial production without trade mentioned in the question.

Suppose That a Worker in Cornland Can Grow Either 40