Question
Consider the nations of India and Peru. Each can produce rice and bananas. If Peru spends all of its time on rice it can produce
Consider the nations of India and Peru. Each can produce rice and bananas. If Peru spends all of its time on rice it can produce a maximum of 80 units in a day, leaving it no time for banana production. Or, if it spends all of its time on bananas, it can produce 20 of them in a day, leaving no time for rice production. Peru is also capable of producing any linear combination of rice and bananas. India can produce 75 rice units (and no bananas) if it specializes completely in rice, or a maximum of 25 bananas (and no rice) if it produces only bananas. As with Peru, India can produce any linear combination of these extremes (for example, 60 rice units and 5 bananas).
Question A) India and Peru decide to cooperate in their rice and banana production. They decide that they want to consume a total of exactly 20 units of rice between them, and they are trying to figure out who should produce the rice so that they can spend the rest of their time making bananas. Initially they put India charge of rice production, on the grounds that this will enable Peru to focus completely on bananas production. In addition to the 20 units of rice, how many bananas will be produced by India and Peru, combined? (5 points)
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