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10 December, 08:29

Suppose that a worker in Tabletland can produce either 4 tablets or 1 television per year, and a worker in Ledville can produce either 2 tablets or 4 televisions per year. Each nation has 50 workers. Also suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Tabletland trades 50 tablets to Ledville in exchange for 50 televisions each year, then each country's maximum consumption of new tablets and televisions per year will be

a) 150 tablets, 50 televisions in Tabletland and 50 tablets, 150 televisions in Ledville.

b) 250 tablets, 50 televisions in Tabletland and 50 tablets, 250 televisions in Ledville.

c) 200 tablets, 0 televisions in Tabletland and 0 tablets, 200 televisions in Ledville.

d) 100 tablets, 100 televisions in Tabletland and 100 tablets, 100 televisions in Ledville.

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Answers (2)
  1. 10 December, 09:53
    0
    A) 150 tablets, 50 televisions in Tabletland and 50 tablets, 150 televisions in Ledville.

    Explanation:

    Tabletland's opportunity cost of producing tablets over TVs = 1/4 = 0.25 TVs per tablet

    Tabletland's opportunity cost of producing TVs over tablets = 4/1 = 4 tablets per TV

    Ledville's opportunity cost of producing tablets over TVs = 4/2 = 2 TVs per tablet

    Ledville's opportunity cost of producing TVs over tablets = 2/4 = 0.5 tablets per TV

    This means that Tabletland has a comparative advantage in the production of tablets and Ledville in the production of TVs.

    Tabletland should produce = 50 x 4 tablets = 200 tablets per year Ledville should prodcue = 50 x 4 TVs = 200 TVs per year

    After trade:

    Tabletland will have 150 tablets and 50 TVs Ledville will have 150 TVs and 50 tablets
  2. 10 December, 11:45
    0
    The correct option is A.

    Explanation:

    Tabletland will be producing either 200 tablets or 50 television per year, and a Ledville can produce 100 tablets or 200 television.

    If tabletland is exchanging 50 tablets for 50 television they will have 150 tablets and 50 television. And led ville will have 150 televisions and 50 tablets.

    The answer is "A", 150 tablets, 50 television in tablet land and 50 tablets, 150 television in Ledville.
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