Question

g Two countries produce bananas and sugar. In Country X each worker in a one-day period can produce either 15.4 pounds of bananas or 2.4 pounds of sugar. In Country Y each worker in a one-day period can produce either 8.7 pounds of bananas or 3.1 pounds of sugar. Both countries have constant opportunity cost of production and decide to specialize and exchange. The country that specializes in bananas is willing to sell 27 pounds of bananas in return for at least how many pounds of sugar

Answer 1

country X will export 27 pounds of Bananas for 4.21 pounds of sugars

Step-by-step explanation:

For country X

1 labor period = 15.4 pounds of bananas

1 labor period = 2.4 pounds of sugar

next calculate opportunity costs

opportunity cost of 1 pound of Banana = 2.4 / 15.4 = 0.1558

opportunity cost of 1 pound of sugar = 15.4 / 2.4 = 6.4167

For country Y

1 labor period = 8.7 pounds of bananas

1 labor period = 3.1 pounds of sugar

opportunity cost of 1 pound of banana = 3.1 / 8.7 = 0.3563

opportunity cost of 1 pound of sugar = 8.7 / 3.1 = 2.8064

when the opportunity costs are compared

Country X has a lower opportunity cost for the production of banana while

Country Y has a lower opportunity cost for the production of sugar

Hence country X will export Banana

I pound of Banana will be exported for 0.1558 sugars

i.e. 27 pounds of Bananas will exchanged for ( 27 * 0.1558 ) sugars

27 pounds of Bananas = 4.21 pounds of sugars