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

To produce 20 tons of wheat, Home needs to allocate 20 workers for one day of work (as each worker produces 1 ton of wheat per day). To produce 10 tons of corn, Home needs to allocate 20 workers for 2 days of work (as each worker produces 0.5 ton of corn per day). Therefore, Home's total labor force is 20 + 20 + 20 = 60 workers. However, the question asks for the labor force only for one day, so the correct answer is 60 workers divided by 2 (for the two days needed to produce corn) = 30 workers.

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