Question

Assume that one day's labor in Argentina can produce either 20 units of cloth or 2 units of wine, while in Chile one day's labor can produce either 24 units of cloth or 12 units of wine. If Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine, the increase in combined output by those two workers will be:

Answer 1

cloth production increase is 16 units

wine production increase is 8 units

Explanation:

Given data

Argentina produce cloth = 20 units

Argentina produce wine = 2 units

chile produce cloth = 24 units

chile produce wine = 12 units

to find out

increase in combined output

solution

we know according to question Argentina transfers 2 units of labor from wine to cloth and Chile transfers 1 unit of labor from cloth to wine

therefore cloth production increase = Argentina produced total cloth - before transfer chile produce cloth ...........1

we can say that Argentina produced total cloth is 2 × 20 = 40 units

so from equation 1

cloth production increase = 40 - 24 = 16 units

cloth production increase is 16 units

and we now can say wine production increase = chile produce wine - before transfer Argentina produce wine .............2

so Chile produced total wine is 1 × 12 = 12 units

and Argentina produce wine with 2 units of labor (2 × 2) = 4

so from equation 2

wine production increase = 12 - 4 = 8 units

wine production increase is 8 units