13. Chile and Argentina each produce jellybeans and peanut butter, using labor a

Question

13. Chile and Argentina each produce jellybeans and peanut butter, using labor as their only resource. Each country has 1,000 hours of labor. In Chile, an hour produces a pound of jellybeans and 2 hours produce a pound of peanut butter. In Argentina, an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter. When they do not trade with each other, Chile consumes 600 pounds of jellybeans and 200 pounds of peanut butter, and Argentina consumes 400 pounds of jellybeans and 200 pounds of peanut butter. What is the price of peanut butter in Argentina before the two countries begin to trade with each other?

d. 3 pounds of jellybeans per pound of peanut butter

14. Chile and Argentina each produce jellybeans and peanut butter, using labor as their only resource. Each country has 1,000 hours of labor. In Chile, an hour produces a pound of jellybeans and 2 hours produce a pound of peanut butter. In Argentina, an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter. When they do not trade with each other, Chile consumes 600 pounds of jellybeans and 200 pounds of peanut butter, and Argentina consumes 400 pounds of jellybeans and 200 pounds of peanut butter. Suppose that Chile and Argentina begin to trade with each other. Each completely specializes in the product in which it finds its comparative advantage. How many pounds of peanut butter and jellybeans do the two countries jointly produce?

b. 1,000 pounds of jellybeans and 500 pounds of peanut butter

please expain why these answers are correct

Explanation / Answer

Answer 13

Before Trade, In Argentina , an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter,. Hence Cost of jellybean = 1 hr of work, lets assume wage per hour be x. So cost of jellybean = x and

Cost of peanut butter = 3 hours of work. so cost of Peanut butter = 3x.

Hence cost of peanut butter 3 times if jellybean.

So in terms of opportunity cost, in order to produce 1 pound of peanut butter we have to sacrifice 3hrs which are worth 3 pound of jellybean.

Hence 3 pounds of jellybeans per pound of peanut butter.

Answer 14

In order to produce 1unit of jellybean in Chile we have to sacrifice 1/2 unit of peanut butter while in Argentina we have to sacrifice 1/3 of peanut butter.

So, Argentina has Comparative adavantage over Chile for jellybeans and Chile has advantage over Argentina in Peanut butter. So Argentna will export Jellybean and Chile will export Peanut butter.

Hence Argentina will only produce Jellybean with 1000 hr of labor which is equal to 1000 pound of jellybean because Argentina will specializes in Jellybean .

Hence Chile will only produce Peanut butter with 1000 hr of labor which is equal to 1000/2 = 500 pound of peanut butter because Chile specializes in Peanut butter

Hence, 1000 pound of jellybean and 500 pounds of peanut butter is the correct answer

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