Answer: d. 340 bushels of corn and 500 bushels of oats.
Explanation:
The country that has the lower opportunity cost in producing a certain commodity is the one with competitive advantage.
Cornland
Opportunity cost of growing Corn = 10/40 = 1/4 bushels of oats
Opportunity cost of growing oats = 40 / 10 = 4 bushels of corn
Oatland
Opportunity cost of growing Corn = 50/5 = 10 bushels of oats
Opportunity cost of growing oats = 5/50 = 1/10 bushels of corn
Cornland therefore has competitive advantage in producing corn and Oatland has competitive advantage in oats.
If both countries traded, Cornland would focus on corn and Oatland would focus on oats.
If all of Cornland's workers focused on corn, production would be:
= 20 * 40 bushels per worker
= 800 bushels of corn
If all of Oatland workers focused on oats, production would be:
= 20 * 50
= 1,000 bushels of oats
Increase in corn would be:
= 800 - (400 bushels from Cornland + 60 bushels from Oatland)
= 340 bushels of corn
Increase in oats:
= 1,000 - (100 bushels from Cornland + 400 bushels from Oatland)
= 500 bushels of oats
