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 for 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, as they can produce 10 units of grain or 2 units of incense per year, while Zenland can produce 5 units of grain or 15 units of incense per year. On the other hand, Zenland has a comparative advantage in producing incense, as they can produce 15 units of incense for every 5 units of grain, which is a better ratio than Agland's 2 units of incense for every 10 units of grain.

If each country specializes in producing the good for which it has a comparative advantage, Agland will produce 200 units of grain (20 workers x 10 units per worker) and 40 units of incense (20 workers x 2 units per worker), while Zenland will produce 150 units of incense (10 workers x 15 units per worker) and 0 units of grain.

The combined yearly output of the two countries will then be 200 units of grain and 190 units of incense. This is an increase of 50 units of grain (from 150 units to 200 units) and 170 units of incense (from 20 units to 190 units), which means that the correct answer is D: 50 units of grain and 130 units of incense.

Suppose That a Worker in Agland Can Produce Either 10