Chile and Argentina Each Produce Jellybeans and Peanut Butter, Using

Multiple Choice

Chile and Argentina each produce jellybeans and peanut butter, using labor as their only resource. Each country has 1,000 hours of labor. In Chile, an hour produces a pound of jellybeans and 2 hours produce a pound of peanut butter. In Argentina, an hour produces a pound of jellybeans and 3 hours produces a pound of peanut butter. When they do not trade with each other, Chile consumes 600 pounds of jellybeans and 200 pounds of peanut butter, and Argentina consumes 400 pounds of jellybeans and 200 pounds of peanut butter. In order for Chile to gain from trade, the price of jellybeans must be less than:

A) 2 pounds of peanut butter per pound of jellybeans.
B) 3 pounds of peanut butter per pound of jellybeans.
C) 1/3 pound of peanut butter per pound of jellybeans.
D) 1/2 pound of peanut butter per pound of jellybeans.