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Assume Cliff and Paul were both producing wheat and corn, and each person was dividing his time equally between the two. Then each decides to specialize in the product in which he has a comparative advantage. Furthermore, they agree to trade 3 bushels of wheat for 3 bushels of com. As a result of these new arrangements, Cliff is able to consume a.3 bushels of wheat and 3 bushels of corn, and this point lies outside of Cliff's production possibilities frontier. b.4 bushels of wheat and 3 bushels of com, and this point lies on Cliff's production possibilities frontier. c.3 bushels of wheat and 2 bushels of com, and this point lies on Cliff's production possibilities frontier. d.4 bushels of wheat and 3 bushels of com, and this point lies outside of Cliff's production possibilities frontier.

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jepessoa

Answer:

A) 3 bushels of wheat and 3 bushels of corn, and this point lies outside of Cliff's production possibilities frontier.

Explanation:

Paul's production possibilities frontier = 8 bushels of wheat ; 10 bushels of corn

Cliff's production possibilities frontier = 6 bushels of wheat ; 4 bushels of corn

Paul's opportunity cost of producing 1 bushel of corn = 8/10 = 4/5 bushels of wheat.

Cliff's opportunity cost of producing 1 bushel of wheat = 4/6 = 2/3 of corn

So Paul should specialize in producing corn with a total production of 10 bushels of corn and Cliff will specialize in producing wheat with a total production of 6 bushels of wheat.

If Cliff trades 3 bushels of wheat for 3 bushels of corn, he will be able to consume 3 bushels of wheat (= 6 - 3) and 3 bushels of corn, resulting in a net gain of 1.5 bushels of wheat.

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