20. Assume that two countries (Home and Foreign) each produce two goods (wheat and rice) under constant cost production. Home produces 3 tons of rice or 1 ton of wheat with a day of labour. Foreign produces 2 tons of rice or 4 tons of wheat each day of labour. Without trade (in autarky), Home's daily production is 60 tons of rice and 20 tons of wheat. At which international price will Home's gains from trade be largest? A. 3 tons of rice per ton of wheat B. 2.5 tons of rice per ton of wheat C. 2 tons of rice per ton of wheat D. 1.5 ton of rice per ton of wheat E. 1 ton of rice per ton of wheat
20. Assume that two countries (Home and Foreign) each produce two goods (wheat and rice) under constant cost production. Home produces 3 tons of rice or 1 ton of wheat with a day of labour. Foreign produces 2 tons of rice or 4 tons of wheat each day of labour. Without trade (in autarky), Home's daily production is 60 tons of rice and 20 tons of wheat. At which international price will Home's gains from trade be largest? A. 3 tons of rice per ton of wheat B. 2.5 tons of rice per ton of wheat C. 2 tons of rice per ton of wheat D. 1.5 ton of rice per ton of wheat E. 1 ton of rice per ton of wheat
Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter9: Application: International Trade
Section: Chapter Questions
Problem 5CQQ
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Transcribed Image Text:20. Assume that two countries (Home and Foreign) each produce two goods (wheat and rice) under
constant cost production. Home produces 3 tons of rice or 1 ton of wheat with a day of labour. Foreign
produces 2 tons of rice or 4 tons of wheat each day of labour. Without trade (in autarky), Home's daily
production is 60 tons of rice and 20 tons of wheat. At which international price will Home's gains from
trade be largest?
A. 3 tons of rice per ton of wheat
B. 2.5 tons of rice per ton of wheat
C. 2 tons of rice per ton of wheat
D. 1.5 ton of rice per ton of wheat
E. 1 ton of rice per ton of wheat
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