Question

France and England both produce wine and cloth with constant opportunity costs. France can produce 150 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. England can produce 50 barrels of wine if it produces no cloth or 100 bolts of cloth if it produces no wine. We can conclude that France produces ________ units of wine and ________ units of cloth and that France consumes ________ units of wine and ________ units of cloth.
a.150; 100; 100; 100
b.150; 0; 100; 50
c.150; 0; 50; 50
d. 0; 100; 50; 50

Answer 1

Answer: B)150; 0; 100; 50

Explanation:

Based on the information that has been provided in the question, for France to produce a barrel of wine, it'll have an opportunity cost of:

= 100/150 = 0.67 bolts of clothes

For England to produce a barrel of wine, the opportunity cost will be:

= 150/50 = 3 bolts of clothes

Based on the explanation, France has a comparative advantage in wine making as its opportunity cost is lower than that of England.

For France to produce a bolt of cloth, the opportunity cost will be:

= 150/100 = 1.5 barrel of wine

For England to produce a bolt of cloth, the opportunity cost will be:

= 50/150 = 0.33 barrel of wine

Here, England has a comparative advantage in cloth production as its opportunity cost is lower than that of France.

Therefore, we can conclude that France produces 150 units of wine and

0 units of cloth and that France consumes 100 units of wine and 50 units of cloth.