Question

Suppose that in Columbia, one unit of labor can produce 4 tons of papayas or 2 tons of bananas, while in Brazil one unit of labor can produce either 2 tons of papayas or 4 tons of bananas. If each country has 2 units of labor, which of the following consumption combinations can be attained only with specialization and trade?(A) Brazil consumes 8 tons of bananas and no papayas.(B) Columbia consumes 8 tons of papayas and no bananas.(C) Columbia consumes 4 tons of papayas and 4 tons of bananas.(D) Brazil consumes 2 tons of papayas and 4 tons of bananas.

Answer 1

Answer: the correct answer is C. Columbia consumes 4 tons of papayas and 4 tons of bananas.

Step-by-step explanation:

The consumption combination of 4 tons each for both papayas and bananas for Columbia can only be reached through trade, as it requires 3 units of labor to produce. But only 2 units are available. Columbia could reach this consumption combination/bundle by producing 8 tons of papayas and then trading 4 tons to Brazil for 4 tons of bananas. Note that all of the other consumption combinations provided/given can be produced without trade .