Vietnam and Ecuador both produce shrimp and wheat. Vietnam can produce 80 thousand pounds of shrimp or 40 thousand bushels of wheat in a year. Ecuador can produce 60 thousand pounds of shrimp or 20 thousand bushels of wheat in a year. Ecuador's opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. Vietnam's opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. The two countries decide to specialize and trade with each other. The country that produces wheat will sell one bushel of wheat for no less than pounds of shrimp. The other country will pay no more than pounds of shrimp for the one bushel of wheat. Enter whole numbers.

Question

Reed Larson

Business

9 August, 00:40

Vietnam and Ecuador both produce shrimp and wheat. Vietnam can produce 80 thousand pounds of shrimp or 40 thousand bushels of wheat in a year. Ecuador can produce 60 thousand pounds of shrimp or 20 thousand bushels of wheat in a year. Ecuador's opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. Vietnam's opportunity cost of producing one bushel of wheat is equal to pounds of shrimp. The two countries decide to specialize and trade with each other. The country that produces wheat will sell one bushel of wheat for no less than pounds of shrimp. The other country will pay no more than pounds of shrimp for the one bushel of wheat. Enter whole numbers.

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Answers (1)

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Audrina Schmitt · Answer 1

There are 2 potential arrangements: Vietnam specialize in producing Shrimp and Ecuador specialize in producing wheat; or Vietnam specialize in producing Wheat and Ecuador specialize in producing shrimp.

Explanation:

In either case, the total outcome will be 100 units (since bushels and pounds are exchangeable, they are considered the same). According to the combined preferences of bilateral trade, each combination could increase the total goods to be traded. In the 1st case could be 20 units (the wheat that Ecuador could exchange to get some shrimp), and the 2nd case could be 40 units (the Wheat that Vietnam could produce and trade). The 2nd case could end in a more balanced distribution of the total products, since the deviation of produced units among countries is lower (60 unites of shrimps and 40 units of wheat respectively)