Question

Suppose that in Slovakia one unit of labor can produce either 20 tons of wheat or 40 tons of soy and in Poland one unit of labor can produce either 40 tons of wheat or 20 tons of soy. If each country has two units of labor, which of the following consumption combinations can be attained only with trade?A. Slovakia consumes 80 tons of soy.
B. Poland consumes 80 tons of wheat.
C. Poland consumes 40 tons of wheat and 20 tons of soy.
D. Slovakia consumes 30 tons of both soy and wheat.

Answer 1

Answer:

D. Slovakia consumes 30 tons of both soy and wheat.

Explanation:

• According to the statement, Slovakia can produce 40 tons of wheat, 80 tons of soy or 20 tons of wheat and 40 tons of soy with 2 units of labor. On the other hand, Poland can produce 80 tons of wheat ,40 tons of soy  or 40tons of wheat and 20tons of soy with two units of labor.

• If the two countries do not trade at all, they would have to consume what they can produce. Slovakia could only consume a maximun amount of 40 tons of wheat or 80 tons of soy (or a combination of 20 tons of wheat and 40 tons of soy), and Poland could only consume a maximun amount of 80 tons of wheat or 40 tons of soy (or a combination of  40 tons of wheat and 20 tons of soy).

• Slovakia can only consume 30 tons of both soy and wheat only if it trades,  otherwise, this situation could not be attained, as mentioned in the previous paragraph.