Suppose that a worker in Radioland can produce either 4 radios or 1 television per year, and a worker in Teeveeland can produce either 1 radios or 4 televisions per year. Each nation has 150 workers. Also, suppose that each country completely specializes in producing the good in which it has a comparative advantage. If Radioland trades 50 radios to Teeveeland in exchange for 50 televisions each year, then each country's maximum consumption of new radios and televisions per year will be

A) 50 radios, 550 televisions in Radioland and 550 radios, 50 televisions in Teeveeland.
B) 550 radios, 50 televisions in Radioland and 50 radios, 550 televisions in Teeveeland.
C) 150 radios, 50 televisions in Radioland and 50 radios, 150 televisions in Teeveeland.
D) 550 radios, 50 televisions in Radioland and 50 radios, 600 televisions in Teeveeland.

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Richie Satterlee · Accepted Answer

Final Answer : B, Explanation :  Radioland has a comparative advantage in producing radios (4 radios per worker vs. 1 television per worker), so it specializes in radios. With 150 workers, it can produce 600 radios (150 workers * 4 radios/worker). After trading 50 radios for 50 televisions, Radioland has 550 radios and 50 televisions. Teeveeland has a comparative advantage in producing televisions (4 televisions per worker vs. 1 radio per worker), so it specializes in televisions. With 150 workers, it can produce 600 televisions (150 workers * 4 televisions/worker). After trading 50 televisions for 50 radios, Teeveeland has 550 televisions and 50 radios.

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