Question

Suppose that a worker in Agland can produce either 10 units of organic grain or 2 units of incense per year, and a worker in Zenland can produce either 5 units or organic grain or 15 units of incense per year. There are 20 workers in Agland and 10 workers in Zenland. Currently, the two countries do not trade. Agland produces and consumes 100 units of grain and 20 units of incense per year. Zenland produces and consumer 50 units of grain and no incense per year. If each country made the decision to specialize in producing the good in which it has a comparative advantage, then what will the combined yearly output of the two countries increase by?

A) 30 units of grain and 100 units of incense.
B) 30 units of grain and 150 units of incense.
C) 50 units of grain and 90 units of incense.
D) 50 units of grain and 130 units of incense.

Answer 1

D

Step-by-step explanation:

Agland produces 100 units of organic grain and Zenland produces 50 units of organic grains; their combine total = 150 grains

Agland produces 20 units of incense while Zenland produces nothin; their combine total = 20 incense

if each country specialize in producing the good in which they have comparative advantage then

Agland produce (10 × 20 ) organic grains which 200 organic grain with Zenland producing nothing; their combine total will 200 grains

Zenland doing the same by producing (10 × 15) incense which will equal 150 incense and Agland produce nothing their combine total is 150 incense

their combined yearly output of the two countries increase by

200 - 150 for grains = 50 units of grains

150 - 20 for incense = 130 units of incense