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2. Absolute and comparative advantage Cor Activity Frame hboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce jeans, wheat, or a combination of both. The following table shows the amount of labor hours required to produce 1 pair of jeans or 1 bushel of wheat. Country Charisma Fiatstan Jeans Wheat (Labor hours per pair) (Labor hours per bushel) 80 24 16 12 has an absolute advantage in the production of jeans, and of wheat. has an absolute advantage in the production Initially, suppose Charisma uses 54,000 hours of labor per week to produce jeans and 18,000 hours per week to produce wheat, while Fiatstan uses 18,000 hours of labor per week to produce jeans and 54,000 hours per week to produce wheat. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of jeans and wheat it produces. Charisma's opportunity cost of producing 1 pair of jeans is is of wheat. Therefore, comparative advantage in the production of wheat. of wheat, and Fiatstan's opportunity cost of producing 1 pair of jeans has a comparative advantage in the production of jeans, and has a is When neither country specializes, the total production of jeans is bushels per week. pairs per week, and the total production of wheat Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce jeans and pairs of jeans and 18,000 hours of labor to produce wheat. It will produce bushels of wheat. Suppose Charisma and Fiatstan agree to trade with each other, exchanging 1,100 pairs of jeans for 3,300 bushels of wheat. In particular, Charisma will export the goods it produces, and Fiatstan will export the goods that Charisma does not produce.

2. Absolute and comparative advantage Cor Activity Frame hboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce jeans, wheat, or a combination of both. The following table shows the amount of labor hours required to produce 1 pair of jeans or 1 bushel of wheat. Country Charisma Fiatstan Jeans Wheat (Labor hours per pair) (Labor hours per bushel) 80 24 16 12 has an absolute advantage in the production of jeans, and of wheat. has an absolute advantage in the production Initially, suppose Charisma uses 54,000 hours of labor per week to produce jeans and 18,000 hours per week to produce wheat, while Fiatstan uses 18,000 hours of labor per week to produce jeans and 54,000 hours per week to produce wheat. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of jeans and wheat it produces. Charisma's opportunity cost of producing 1 pair of jeans is is of wheat. Therefore, comparative advantage in the production of wheat. of wheat, and Fiatstan's opportunity cost of producing 1 pair of jeans has a comparative advantage in the production of jeans, and has a is When neither country specializes, the total production of jeans is bushels per week. pairs per week, and the total production of wheat Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce jeans and pairs of jeans and 18,000 hours of labor to produce wheat. It will produce bushels of wheat. Suppose Charisma and Fiatstan agree to trade with each other, exchanging 1,100 pairs of jeans for 3,300 bushels of wheat. In particular, Charisma will export the goods it produces, and Fiatstan will export the goods that Charisma does not produce.

Principles of Microeconomics
Principles of Microeconomics
7th Edition
ISBN:9781305156050
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
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2. Absolute and comparative advantage Cor Activity Frame hboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce jeans, wheat, or a combination of both. The following table shows the amount of labor hours required to produce 1 pair of jeans or 1 bushel of wheat. Country Charisma Fiatstan Jeans Wheat (Labor hours per pair) (Labor hours per bushel) 80 24 16 12 has an absolute advantage in the production of jeans, and of wheat. has an absolute advantage in the production Initially, suppose Charisma uses 54,000 hours of labor per week to produce jeans and 18,000 hours per week to produce wheat, while Fiatstan uses 18,000 hours of labor per week to produce jeans and 54,000 hours per week to produce wheat. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of jeans and wheat it produces. Charisma's opportunity cost of producing 1 pair of jeans is is of wheat. Therefore, comparative advantage in the production of wheat. of wheat, and Fiatstan's opportunity cost of producing 1 pair of jeans has a comparative advantage in the production of jeans, and has a is When neither country specializes, the total production of jeans is bushels per week. pairs per week, and the total production of wheat Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce jeans and pairs of jeans and 18,000 hours of labor to produce wheat. It will produce bushels of wheat. Suppose Charisma and Fiatstan agree to trade with each other, exchanging 1,100 pairs of jeans for 3,300 bushels of wheat. In particular, Charisma will export the goods it produces, and Fiatstan will export the goods that Charisma does not produce.
Transcribed Image Text:2. Absolute and comparative advantage Cor Activity Frame hboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce jeans, wheat, or a combination of both. The following table shows the amount of labor hours required to produce 1 pair of jeans or 1 bushel of wheat. Country Charisma Fiatstan Jeans Wheat (Labor hours per pair) (Labor hours per bushel) 80 24 16 12 has an absolute advantage in the production of jeans, and of wheat. has an absolute advantage in the production Initially, suppose Charisma uses 54,000 hours of labor per week to produce jeans and 18,000 hours per week to produce wheat, while Fiatstan uses 18,000 hours of labor per week to produce jeans and 54,000 hours per week to produce wheat. Assume there are no other countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of jeans and wheat it produces. Charisma's opportunity cost of producing 1 pair of jeans is is of wheat. Therefore, comparative advantage in the production of wheat. of wheat, and Fiatstan's opportunity cost of producing 1 pair of jeans has a comparative advantage in the production of jeans, and has a is When neither country specializes, the total production of jeans is bushels per week. pairs per week, and the total production of wheat Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce jeans and pairs of jeans and 18,000 hours of labor to produce wheat. It will produce bushels of wheat. Suppose Charisma and Fiatstan agree to trade with each other, exchanging 1,100 pairs of jeans for 3,300 bushels of wheat. In particular, Charisma will export the goods it produces, and Fiatstan will export the goods that Charisma does not produce.
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