Question

In Lima one worker can produce either 33 bushels of corn of 6 pounds of tomatoes in one day. In Puma one worker can produce either 103 bushels of corn or 14 pounds of tomatoes in one day. The country that specializes in corn production is willing to buy one pound of tomatoes for not more than how many bushels of corn?

Answer 1

The maximum number of bushels of corn that could be traded for one pound of tomatoes is based on the lower opportunity cost of the two regions, which is 5.5 bushels of corn for Lima.

Step-by-step explanation:

The problem presented involves comparing the production capabilities of workers in two different regions and understanding the implications for trade, specifically the exchange rate between corn and tomatoes.

In Lima, the production rate is 33 bushels of corn or 6 pounds of tomatoes per worker per day. In Puma, it is 103 bushels of corn or 14 pounds of tomatoes per worker per day. To determine the maximum number of bushels of corn that could be traded for one pound of tomatoes, one must consider the opportunity cost of producing tomatoes instead of corn in each country.

Lima's opportunity cost for producing 1 pound of tomatoes is 33/6 bushels of corn, which simplifies to 5.5 bushels of corn/pound of tomatoes. For Puma, the opportunity cost is 103/14 bushels of corn/pound of tomatoes, which simplifies to approximately 7.36 bushels of corn/pound of tomatoes. Therefore, the maximum number of bushels of corn that a country specializing in corn production might be willing to offer for one pound of tomatoes will be based on the lower opportunity cost so as not to incur a loss. In this case, Lima's opportunity cost sets the maximum exchange rate at 5.5 bushels of corn for one pound of tomatoes.

Answer 2

Puma is the country that specializes in produce corn and is willing to pay no more than 7.35 bushel of corns per pound of tomatoes.

Step-by-step explanation:

This value comes from the relative cost of producing one pound of tomatoes. In the case of Puma, is better for the country to produce tomatoes if the price is higher than 7.35 bushel of corn, any value below is better to produce corn and trade. In the case of Lima, has sense to trade when the price of tomatoes is higher of 5.5.