Question

Country beta and country alpha both produce liters of wine and meters of cloth.

a. in country alpha each worker in an hour can produce either 6 liters of wine of 24 meters of cloth.
b. in country beta each worker in an hour can produce either 10 liters of wine or 50 meters of cloth.
c. each country has constant opportunity cost of production and each has 100 hours of labor available.

initially the two countries do not trade.
a. country alpha allocates 50 hours of labor to wine production and 50 hours of labor to cloth production.
b. country beta allocates 25 hours of labor to wine production and 75 hours of labor to cloth production.

the two countries decide to completely specialize and then engage in trade.
with specialization country alpha will produce ________ liters of wine and ______ meters of cloth.

Answer 1

Based on the available information, the country alpha will produce 600 liters of wine and 0 meters of cloth.

With specialization, country alpha will allocate all 100 hours of labor to the production of the good in which it has a comparative advantage, which is wine.

Since each worker in country alpha can produce 6 liters of wine in an hour, with 100 hours of labor, country alpha will produce 6 liters/hour * 100 hours = 600 liters of wine.

Since country alpha is specializing in wine production, it will not produce any cloth.

Therefore, country alpha will produce 600 liters of wine and 0 meters of cloth.