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

Initially the two countries do not trade. Country A allocates 60 workers to toaster production and 40 workers to sweater production so they produce a total of toasters and sweaters. Country B allocates 60 workers to toaster production and 40 workers to sweater production so they produce a total of toasters and sweaters.

The two countries decide to completely specialize and then engage in trade. With specialization country A will produce toasters and sweaters, and country B will produce toasters and sweaters. The two countries decide to trade 190 toasters in exchange for 950 sweaters. After trade country A will consume toasters and sweaters, and country B will consume toasters and sweaters.

After specialization and exchange, country A is able to consume more toasters and more sweaters than it could before trade. Country B is able to consume more toasters and more sweaters after specialization and exchange than it could before specialization and exchange.

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hamzatauseef hamzatauseef · Answer 1 · 2019-12-23T13:01:21+01:00

Answer:

See below.

Explanation:

This is a question that deals with comparative and absolute advantage different countries have in production. So lets summarize the information,

Country A

1 worker = 5 toasters

1 worker = 20 sweaters

Country B

1 worker = 3 toasters

1 worker = 18 sweaters

So lets see what happens when the countries do not specialize,

Country A

60 workers = 300 toasters

40 workers = 800 sweaters

Country B

60 workers = 180 toasters

40 workers = 720 sweaters

Opportunity cost for Country A is as,

4 sweaters per 1 toaster

Opportunity cost for Country B is as,

6 sweaters per 1 toaster

Toasters are cheaper to produce for Country A and sweaters are cheaper to produce for Country B.

When the specialize

Country A produces only 500 toasters

Country B produces only 1800 sweaters

After trade

Country A has, 310 toasters and 950 sweaters

Country B has, 190 toasters and 850 sweaters

When the countries trade they are able to consume more of each product and thus the specialization has helped both countries.

Total production of 1800 sweaters is more than if the countries produced individually. So is also the case with toasters.

Hope that helps.