Country X and country Y both produce bicycles and sweaters. In country X each worker in...

Country X and country Y both produce bicycles and sweaters. In country X each worker in a day can produce either 5 bicycles or 20 sweaters. In country Y each worker in a day can produce either 3 bicycles of 18 sweaters. Each country has constant opportunity cost of production and each has 100 workers. Enter whole numbers in each blank.

In country X the opportunity cost of producing one bicycle is ____ sweaters and in country Y the opportunity cost of producing one bicycle is_____ sweaters.

Initially the two countries do not trade. Country X allocates 60 workers to bicycle production and 40 workers to sweater production so they produce a total of ____ bicycles and _____ sweaters. Country Y allocates 60 workers to bicycle production and 40 workers to sweater production so they produce a total of ____ bicycles and ____sweaters.

The two countries decide to completely specialize and then engage in trade. With specialization country X will produce _____ bicycles and_____ sweaters, and country Y will produce ____ bicycles and ____ sweaters. The two countries decide to trade 190 bicycles in exchange for 950 sweaters. After trade country X will consume _____ bicycles and ______ sweaters, and country Y will consume_____ bicycles and ____ sweaters.

After specialization and exchange, country X is able to consume____ more bicycles and _____ more sweaters than it could before trade. Country Y is able to consume ____ more bicycles and_____ more sweaters after specialization and exchange than it could before specialization and exchange.

Expert Solution

In country X the opportunity cost of producing one bicycle is 20/5=4 sweaters and in country Y the opportunity cost of producing one bicycle is 18/3=6 sweaters.

Initially the two countries do not trade. Country X allocates 60 workers to bicycle production and 40 workers to sweater production so they produce a total of 60x5=300 bicycles and 40x20=800 sweaters. Country Y allocates 60 workers to bicycle production and 40 workers to sweater production so they produce a total of 60x3=180 bicycles and 40x18 = 720 sweaters.

The two countries decide to completely specialize and then engage in trade. With specialization country X will produce 100x5=500 bicycles and 0 sweaters, and country Y will produce 0 bicycles and 100x18=1800 sweaters. The two countries decide to trade 190 bicycles in exchange for 950 sweaters. After trade country X will consume 500-190=310 bicycles and 950 sweaters, and country Y will consume 190 bicycles and 1800-950=850 sweaters.

After specialization and exchange, country X is able to consume 310-300=10 more bicycles and 950-800=150 more sweaters than it could before trade. Country Y is able to consume 190-180=10 more bicycles and 850-720=130 more sweaters after specialization and exchange than it could before specialization and exchange.

Rahul Sunny answered 2 years ago

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