3. Suppose there are two states that do not trade: Iowa and Nebraska. Each state produces the same...

Question

3. Suppose there are two states that do not trade: Iowa and Ne
aska. Each state produces the
same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat
is 3 bushels of corn. For Ne
aska the opportunity cost of producing 1 bushel of corn is 3 bushels
of wheat. At present, Iowa produces 20 million bushels of wheat and 120 million bushels of
corn, while Ne
aska produce 20 million bushels of corn and 120 million bushels of wheat.
a. Explain how, with trade, Ne
aska can end up with 40 million bushels of wheat and 120
million bushels of corn while Iowa can end up with...

David · Accepted Answer

3. Suppose there are two states that do not trade: Iowa and Nebraska. Each state produces the 
same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat 
is 3 bushels of corn. For Nebraska the opportunity cost of producing 1 bushel of corn is 3 bushels 
of wheat. At present, Iowa produces 20 million bushels of wheat and 120 million bushels of 
corn, while Nebraska produce 20 million bushels of corn and 120 million bushels of wheat. 
a. Explain how, with trade,

3. Suppose there are two states that do not trade: Iowa and Nebraska. Each state produces the same two goods: corn and wheat. For Iowa the opportunity cost of producing 1 bushel of wheat is 3 bushels...

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