Vietnam and Ecuador both produce shrimp and wheat. Vietnam can produce 80 thousa

Question

Vietnam and Ecuador both produce shrimp and wheat. Vietnam can produce 80 thousand pounds of shrimp or 40 thousand bushels of wheat in a year. Ecuador can produce 60 thousand pounds of shrimp or 20 thousand bushels of wheat in a year. Ecuador’s opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. Vietnam’s opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. The two countries decide to specialize and trade with each other. The country that produces wheat will sell one bushel of wheat for no less than pounds of shrimp. The other country will pay no more than pounds of shrimp for the one bushel of wheat. Enter whole numbers.

Explanation / Answer

Ecuador’s opportunity cost of producing one bushel of wheat is equal to 3 pounds of shrimp(i.e. 60/20=3).

Vietnam’s opportunity cost of producing one bushel of wheat is equal to 2 pounds of shrimp.(i.e. 80/40=3).

The country that produces wheat will sell one bushel of wheat for no less than 2 pounds of shrimp. The other country will pay no more than 3 pounds of shrimp for the one bushel of wheat.

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