Question

Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. Suppose that trade is then initiated between the two countries, and Freedonia sends 30 units of corn to Sylvania in exchange for 30 units of wheat. Freedonia will now be able to consume a maximum ofA) 30 units of corn and 30 units of wheat.

B) 40 units of corn and 30 units of wheat.
C) 40 units of corn and 20 units of wheat.
D) 10 unites of corn and 40 units of wheat.

Answer 1

The correct answer is option A.

Step-by-step explanation:

Freedonia and Sylvania both produce corn and wheat.

Freedonia can produce either 6 units of corn or 2 units of wheat per year.

A worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year.

Each nation has 10 workers.

If Freedonia employs all its workers to produce corn and Sylvania uses all its workers to produce wheat both will be able to produce 60 units of corn and 60 units of wheat respectively.

They exchange 30 units of corn for 30 units of wheat.

Corn left with Freedonia

= 60 - 30 = 30 units

Wheat gained in exchange by Freedonia is 30 units.

Similarly, wheat left with Sylvania after the exchange

= 60 - 30 = 30 units

Corn gained in exchange by Sylvania is 30 units.

This means that both will now be able to consume 30 units of corn and 30 units of wheat.