b, Replace drawing time object Select all Picture Paint Date and insert Paragrap

Question

b, Replace drawing time object Select all Picture Paint Date and insert Paragraph Insert Editing 42. Suppose that a worker in Freedonia can produce either 6 units of corn or 2 units of wheat per year, and a worker in Sylvania can produce either 2 units of corn or 6 units of wheat per year. Each nation has 10 workers. For many years the two countries traded, each completely specializing according to their respective comparative advantages. Now, however, war has broken out between them and all trade has stopped. Without trade, Freedonia produces and consumes 30 units of corn and 10 units of wheat per year. Sylvania produces and consumes 10 units of corn and 30 units of wheat. The war has caused the combined yearly output of the two countries to decline by

Explanation / Answer

Freedonia opportunity cost of producing 1 unit of wheat = 6/2 = 3 units of corn

Sylvania opportunity cost of producing 1 unit of wheat = 2/6 = 1/3 units of corn

Sylvania specializes in wheat while Freedonia specializes in corn

Total wheat production = 6 x 10 = 60 units

Total corn production = 6 x 10 = 60 units

After war:

total wheat produced = 30 + 10 = 40 units

total corn produced = 40 units

Decline:

wheat production decline = 60 - 40 = 20 units

corn production decline = 60 - 40 = 20 units

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