3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Fiatstan per week to produce jeans, while Fiatstan uses me there are no other countries willing to trade Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn Charisma 18,000 hours of labor per week to produce corn and 54,000 hours per week to pr neither country goods, so in the absence of trade between these two countries, each country cons of corn and jeans it produces.

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3. Absolute and comparative advantage
Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn,
jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans.
Corn
Jeans
Country
(Labor hours per bushel) (Labor hours per pair)
Charisma
80
16
Fiatstan
24
12
has an absolute advantage in the production of corn, and
has an absolute advantage in the production
of jeans.
Fiatstan
Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn
Charisma
per week to produce jeans, while Fiatstan uses
18,000 hours of labor per week to produce corn and 54,000 hours per week to pr
me there are no other countries willing to trade
neither country
goods, so in the absence of trade between these two countries, each country cons
of corn and jeans it produces.
Transcribed Image Text:3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Fiatstan Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn Charisma per week to produce jeans, while Fiatstan uses 18,000 hours of labor per week to produce corn and 54,000 hours per week to pr me there are no other countries willing to trade neither country goods, so in the absence of trade between these two countries, each country cons of corn and jeans it produces.
3. Absolute and comparative advantage
Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn,
jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans.
Corn
Jeans
Country
(Labor hours per bushel)
(Labor hours per pair)
Charisma
80
16
Fiatstan
24
12
has an absolute advantage in the production of corn, and
has an absolute advantage in the production
Neither country
harisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses
por per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to trade
sence of trade between these two countries, each country consumes the amount of corn and jeans it produces.
Charisma
Fiatstan
Transcribed Image Text:3. Absolute and comparative advantage Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production Neither country harisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses por per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to trade sence of trade between these two countries, each country consumes the amount of corn and jeans it produces. Charisma Fiatstan
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