Production possibilities for two producers and merchants, Eric and Stan, are shown in the table below. Suppose both Eric and Stan are initially independent producers. Eric is producing 160 loaves of bread and 20 logs of wood. Stan is producing 120 logs of wood and 30 loa of bread. Eric's Production Possibilities (monthly) Bread (loaves) Wood (logs) Stan's Production Possibilities (monthly) Bread (loaves) Wood (logs) 200 0 150 0 160 20 120 30 120 40 90 60 80 60 60 90 40 0 80 100 30 0 120 150 Eric and Stan are considering an arrangement of specialization and trade. If they specialize according to comparative advantage and agree on a trade of 30 loaves of bread for 20 logs of wood, then OA. Eric will have the same number of loaves of bread, but he will have more logs of wood. OB. Stan will have the same number of logs of wood, but he will have more loaves of bread. OC. Stan will produce 150 logs of wood, keep 130, and trade 20 to Eric in exchange for 30 loaves of bread. OD. Eric will produce 200 loaves of bread, keep 100, and trade 100 to Stan in exchange for 50 logs of wood.

Production possibilities for two producers and merchants, Eric and Stan, are shown in the table below. Suppose both Eric and Stan are initially independent producers. Eric is producing 160 loaves of bread and 20 logs of wood. Stan is producing 120 logs of wood and 30 loa of bread. Eric's Production Possibilities (monthly) Bread (loaves) Wood (logs) Stan's Production Possibilities (monthly) Bread (loaves) Wood (logs) 200 0 150 0 160 20 120 30 120 40 90 60 80 60 60 90 40 0 80 100 30 0 120 150 Eric and Stan are considering an arrangement of specialization and trade. If they specialize according to comparative advantage and agree on a trade of 30 loaves of bread for 20 logs of wood, then OA. Eric will have the same number of loaves of bread, but he will have more logs of wood. OB. Stan will have the same number of logs of wood, but he will have more loaves of bread. OC. Stan will produce 150 logs of wood, keep 130, and trade 20 to Eric in exchange for 30 loaves of bread. OD. Eric will produce 200 loaves of bread, keep 100, and trade 100 to Stan in exchange for 50 logs of wood.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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