Scenario 34

Scenario 34.2 Suppose labor productivity differences are the only determinants of comparative advantage, and both Egypt and produce only corn and cocoa.In Egypt, 10 bushels of corn or 15 pounds of cocoa can be produced in a day.In Ghana, one day of labor can be used to produce either 2 bushels of corn or 8 pounds of cocoa.
Based on Scenario 34.2, which of the following terms of trade would benefit both countries?

A) 1 pound of cocoa is equal to 0.10 bushels of corn
B) 1 pound of cocoa is equal to 2 bushels of corn
C) 1 pound of cocoa is equal to 1 bushels of corn
D) 1 pound of cocoa is equal to 0.5 bushels of corn
E) 1 pound of cocoa is equal to 1.5 bushels of corn

Correct Answer:

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