Sheila and Jim live in an island where they are the only two workers. Sheila can

Question

Sheila and Jim live in an island where they are the only two workers. Sheila can either catch 10 fish or gather 40 pounds of berries each day, and Jim can either catch 8 fish or gather 24 pounds of berries each day. Both of them work 200 days per year. At current world prices, 1 fish trades for 3.5 pounds of berries (for example, suppose each fish costs $3.50 and each pound of berries costs $1.00). In a closed economy, the citizens of this island could consume up to _____ pounds of berries each year, and if they open up to trade they could consume up to ___ pounds of berries each year. (I think the answer is C, but i just want to make sure the way i did things was right). a. 12,800; 16,000 b. 12,800; 13,600 c. 12,800; 9,600 d. 8,000; 12,800

Explanation / Answer

When the economy is closed

Sheila and Jim will gather berries

Berries gathered by both in a year = 200*40+200*24 = 12800 pounds

When the economy is open

Jim will catch fishes and exchange them for berries from other nation

Fish catched by Jim everday=8

The amount of berries received by Jim in exchange of fishes with other nation = 3.5*8 = 28 pounds

Total berries produced by Sheila in a year = 200*40=8000

Total berries consumed by nation in a year = Berries produced by Sheila+Berries bought by Jim in exchange of fish = 8000+200*28 = 13600

b. 12800; 13600 is answer

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