Figure 3-1
____ 2. Refer to Figure 3-1. Assume that Cliff and Paul were both producing wheat and corn, and each were dividing their time equally between the two. Then they decide to specialize in the product they have a comparative advantage in. As a result, total production of corn would
a. increase by 1 bushel.
b. increase by 3 bushels.
c. increase by 5 bushels.
d. decrease by 2 bushels.
Figures cannot be pasted here, as you see.
To answer this question, we need to analyze the concept of comparative advantage and how it affects total production.
Comparative advantage refers to the ability of a country, individual, or firm to produce a specific good or service at a lower opportunity cost than others. In this case, Cliff and Paul are both producing wheat and corn.
From Figure 3-1, we can see that Cliff can produce 3 bushels of corn or 2 bushels of wheat in a given amount of time, while Paul can produce 2 bushels of corn or 1 bushel of wheat.
To determine their comparative advantages, we compare the opportunity costs of producing corn and wheat for each person. The opportunity cost of producing corn for Cliff is 2/3 bushels of wheat (2 bushels of wheat / 3 bushels of corn). On the other hand, the opportunity cost of producing corn for Paul is 1/2 bushels of wheat (1 bushel of wheat / 2 bushels of corn).
Comparing the opportunity costs, we can see that Paul has a lower opportunity cost in producing corn (1/2 bushels of wheat) compared to Cliff (2/3 bushels of wheat). This means Paul has a comparative advantage in producing corn.
Now, if Cliff and Paul decide to specialize in the product they have a comparative advantage in, they would focus on producing the goods they can produce more efficiently. Since Paul has a comparative advantage in corn production, he would specialize in producing corn, while Cliff would specialize in producing wheat.
As a result, focusing on their respective comparative advantages would lead to increased overall production. Paul's total corn production would increase, but we need to determine the exact increase.
Considering that Cliff and Paul were dividing their time equally between wheat and corn, and Paul decides to specialize in corn, his corn production would increase by the amount he was initially producing as wheat. From Figure 3-1, Paul initially produced 2 bushels of corn in the time he allocated for corn production. Thus, the total production of corn would increase by 2 bushels when Paul specializes in corn.
Therefore, the correct answer is:
b. increase by 2 bushels.