In: Economics
Country A can build 250 tractors and 50 ships if it splits time evenly during a year.
Country B can build 100 tractors and 100 ships if it splits time evenly during the same year.
Country A can build 250 tractors and 50 ships if it splits time evenly during a year.
This implies that if Country A can devote its entire time to build tractors, it can build a maximum of 500 tractors and if it devotes its entire time to build ships, it can build a maximum of 100 ships.
Country A spends 100% of the time to build tractors.
So, Country A will build 500 tractors.
Country B can build 100 tractors and 100 ships if it splits time evenly during a year.
This implies that if Country B can devote its entire time to build tractors, it can build a maximum of 200 tractors and if it devotes its entire time to build ships, it can build a maximum of 200 ships.
Country B will spend its entire time to build ships and would produce 200 ships.
The terms of trade is 1 ship is exchanged for 2 tractors.
Country A wants 100 ships.
This means if it wants to have 100 ships, it have to provide Country B with 200 tractors.
Country A can produce a total of 500 tractors, if it gives 200 tractors to Country B then it is left with 300 tractors.
So,
Country A would have 300 tractors at the end of the year.