Suppose that a worker in Caninia can produce either 2 blankets or 8 meals per day, and a worker in Felinia can produce either 5 blankets or 1 meal per day. Each nation has 10 workers. For many years, the two countries traded, each completely specializing according to their respective comparative advantages. Now war has broken out between them and all trade has stopped. Without trade, Caninia produces and consumes 10 blankets and 40 meals per day and Felinia produces and consumes 25 blankets and 5 meals per day. The war has caused the combined daily output of the two countries to decline by

A) 15 blankets and 35 meals.
B) 25 blankets and 40 meals.
C) 35 blankets and 45 meals.
D) 50 blankets and 80 meals.

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sarah anderson · Accepted Answer

Final Answer : A, Explanation :  Before the war, Caninia would specialize in producing meals (80 meals per day with 10 workers) because it has a comparative advantage in meal production, and Felinia would specialize in producing blankets (50 blankets per day with 10 workers) because it has a comparative advantage in blanket production. After the war, Caninia produces 10 blankets and 40 meals, and Felinia produces 25 blankets and 5 meals. The combined output before the war was 50 blankets and 80 meals, and after the war, it is 35 blankets and 45 meals. The decline is therefore 15 blankets (50-35) and 35 meals (80-45).

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