Multiple Choice
Assume that two countries (Home and Foreign) each produce two goods (corn and wheat) under constant cost production. Home produces 0.5 ton of corn or 1 ton of wheat with a day of labor. Without trade (in autarky) , Home's daily production is 20 tons of wheat and 10 tons of corn. Suppose that Home completely specializes, and it consumes 20 tons of wheat after it begins trading with Foreign. Home trades with Foreign at a 1-to-1 ratio of corn for wheat. How many tons of corn does Home consume when it trades with Foreign?
A) 10 tons of corn
B) 20 tons of corn
C) 30 tons of corn
D) 40 tons of corn
Correct Answer:
Verified
Correct Answer:
Verified
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