SCENARIO: CHILE AND ARGENTINA
Chile and Argentina each produce jellybeans and peanut butter, using
Labor as their only resource.Each country has 1,000 hours of labor.In
Chile, an hour produces a pound of jellybeans and 2 hours produce a
Pound of peanut butter.In Argentina, an hour produces a pound of
Jellybeans and 3 hours produces a pound of peanut butter.When they do
Not trade with each other, Chile consumes 600 pounds of jellybeans and
200 pounds of peanut butter, and Argentina consumes 400 pounds of
Jellybeans and 200 pounds of peanut butter.
Reference: Ref 210
(Scenario: Chile and Argentina) Suppose that Chile and Argentina begin
To trade with one another.Each completely specializes in the product in
Which it finds its comparative advantage.How many pounds of peanut
Butter and jellybeans do the two countries jointly produce?
A)1,000 pounds of jellybeans and 400 pounds of peanut butter
B)1,000 pounds of jellybeans and 500 pounds of peanut butter
C)500 pounds of jellybeans and 1,000 pounds of peanut butter
D)333.33 pounds of jellybeans and 500 pounds of peanut butter

Question

SCENARIO: CHILE AND ARGENTINA
Chile and Argentina each produce jellybeans and peanut butter, using
Labor as their only resource.Each country has 1,000 hours of labor.In
Chile, an hour produces a pound of jellybeans and 2 hours produce a
Pound of peanut butter.In Argentina, an hour produces a pound of
Jellybeans and 3 hours produces a pound of peanut butter.When they do
Not trade with each other, Chile consumes 600 pounds of jellybeans and
200 pounds of peanut butter, and Argentina consumes 400 pounds of
Jellybeans and 200 pounds of peanut butter.
Reference: Ref 2­10
(Scenario: Chile and Argentina) Suppose that Chile and Argentina begin
To trade with one another.Each completely specializes in the product in
Which it finds its comparative advantage.How many pounds of peanut
Butter and jellybeans do the two countries jointly produce?
A)1,000 pounds of jellybeans and 400 pounds of peanut butter
B)1,000 pounds of jellybeans and 500 pounds of peanut butter
C)500 pounds of jellybeans and 1,000 pounds of peanut butter
D)333.33 pounds of jellybeans and 500 pounds of peanut butter

Quizplus · Accepted Answer

Since Chile has a comparative advantage in producing peanut butter, they should produce only peanut butter, using all 1,000 hours of labor to produce 500 pounds of peanut butter. Argentina, on the other hand, has a comparative advantage in producing jellybeans, so they should produce only jellybeans, using all 1,000 hours of labor to produce 1,000 pounds of jellybeans. Therefore, jointly they produce 1,000 pounds of jellybeans and 500 pounds of peanut butter. The correct answer is B.