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. Suppose that Chile and Argentina begin to trade with each other. Each completely specializes in the product in which it finds its comparative advantage. How many more pounds of peanut butter and jellybeans do the two countries jointly produce compared with production before they began to trade?

A) 1,000 pounds of jellybeans and 500 pounds of peanut butter
B) 0 pounds of jellybeans and 500 pounds of peanut butter
C) 1,000 pounds of jellybeans and 0 pounds of peanut butter
D) 0 pounds of jellybeans and 100 pounds of peanut butter