In Lima one worker can produce either 20 bushels of corn of 5 pounds of tomatoes...

In Lima one worker can produce either 20 bushels of corn of 5 pounds of tomatoes in one day. In Puma one worker can produce either 53 bushels of corn or 7 pounds of tomatoes in one day. The country that specializes in tomato production is willing to sell one pound of tomatoes for at least how many bushels of corn? Round to two decimal places.

Solutions

Expert Solution

In Lima:

One worker can produce either 20 bushels of corn of 5 pounds of tomatoes in one day

The opportunity cost of producing 1 bushel of corn = 5/20 = 0.25 pounds of tomatoes

The opportunity cost of producing 1 pound of tomatoes = 20/5 = 4 bushels of corn

In Puma:

One worker can produce either 53 bushels of corn or 7 pounds of tomatoes in one day

The opportunity cost of producing 1 bushel of corn = 7/53 = 0.13 pounds of tomatoes

The opportunity cost of producing 1 pound of tomatoes = 53/7 = 7.57 bushels of corn

Comparative advantage:

The opportunity cost of producing corn is lower for Puma. Therefore, Puma has a comparative advantage in the production of corn and hence, should specialize in the production of corn.

Similarly, the opportunity cost of producing tomatoes is lower for Lima. Therefore, Lima has a comparative advantage in the production of tomatoes and hence, should specialize in the production of tomatoes.

The country that specializes in tomato production i.e., Lima would be willing to sell one pound of tomatoes for at least 4 bushels of corn(equal to its opportunity cost)

Ans: 4 bushels of corn

Rahul Sunny answered 1 year ago

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