Snap and Bolt are two countries that both produce bananas and sugar. In Snap eac

Question

Snap and Bolt are two countries that both produce bananas and sugar. In Snap each worker in a one-hour period can produce either 13.27 pounds of bananas or 6.46 pounds of sugar. In Bolt each worker in a one-hour period can produce either 14.02 pounds of bananas or 3.4 pounds of sugar. Suppose both countries have constant opportunity cost and decide to specialize and exchange. The country that specializes in sugar is willing to sell 100 pounds of sugar for at least _____ pounds of bananas. Enter a numerical value, rounded to two decimal places.

Explanation / Answer

Opportunity cost of 1pound of banana in Snap=6.46/13.27=0.4868 pound of sugar

Opportunity cost of 1 pound of banana in Bolt=3.4/14.02=0.2425 pound of sugar

Thus country Snap will have comparatice advantage in Sugar and Bolt has COmparative advantage in Banana.

Thus suagr is produced in Snap and for 100 pounds of sugar can be exchanged for atleast 13.27/6.46*100=205.417 pounds of banana

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