Hi I need help with the following questions I will leave a t

Hi, I need help with the following questions. I will leave a thumbs up for an explanation, thanks!

Assume a world consists of only two countries: Latvia and Bulgaria, which can produce only two goods: lemons and beef. Latvia can produce 1000 tons of lemons or 500 tons of beef or any linear combination of lemons and beef that satisfies lemons+2×beef=1000. Bulgaria can produce 750 tons of lemons or 500 tons of beef or any linear combination of lemons and beef that satisfies lemons+1.5×beef=750. Countries can freely trade with each other.

3) If price of beef is $300/ton, what is the maximum possible price of lemons in equilibrium?

4) If price of beef is $400/ton, what is the minimum possible price of lemons in equilibrium?

9) Which country benefits from trade (Latvia, Bulgaria, both, or neither) if in equilibrium Latvia produces 400 tons of beef?

10) Which country benefits from trade (Latvia, Bulgaria, both, or neither) if equilibrium prices of lemons and beef are $325/ton and $500/ton respectively?

Solution

Solution : Let us assume the produces of lemon will be x and the produces of beef will be y so,

For Latvia 1000 tons of lemon = x and 500 tons of beef = y and the linear equation is x + 2y = 1000 (eq 1).

For Bulagaria 750 tons of lemon = x and 500 tons of beef = y and the linear equation is x + 1.5y = 750 (eq 2).

If we solve equation 1 & 2 for the value of x & y, then the value of y will be 500 and x will be 0

Ans 3) If the price of beef is $300/ton, the maximum possible price of lemons in equilibrium will be :

Price of 500 tons of beef = $300 * 500 = $150000

  Latvia produces 1000 tons of lemon so the price of lemon will be 150000/1000 = $150/ton

Bulgaria produces 750 tons of beef so the price of lemon will be 150000/750 = $200/ton

Ans 4) If the price of beef is $400/ton, the maximum possible price of lemons in equilibrium will be :

Price of 500 tons of beef = $400 * 500 = $200000

  Latvia produces 1000 tons of lemon so the price of lemon will be 200000/1000 = $200/ton

Bulgaria produces 750 tons of beef so the price of lemon will be 200000/750 = $266.67/ton

Ans 9) Bulgaria

Ans 10) Neither of the country will be benefitted.