3. Galns from trade Consider two neighboring island countries called Feliddad and Bellissima. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of labor) (Bushels per hour of labor) Felicidad 4 16 Bellissima 12 Initially, suppose Bellissima uses million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 corn it produces. Felicidad's opportunity cost of producing 1 pair of jeans is v of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is v of corn. Therefore, has a compárative advantage in the production of jeans, and v has a comparative advantage in the production of corn. Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce million pairs per week, and the country that produces corn will produce million bushels per week. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn. Air
3. Galns from trade Consider two neighboring island countries called Feliddad and Bellissima. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of labor) (Bushels per hour of labor) Felicidad 4 16 Bellissima 12 Initially, suppose Bellissima uses million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 corn it produces. Felicidad's opportunity cost of producing 1 pair of jeans is v of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is v of corn. Therefore, has a compárative advantage in the production of jeans, and v has a comparative advantage in the production of corn. Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce million pairs per week, and the country that produces corn will produce million bushels per week. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn. Air
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:3. Galns from trade
Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per week that they can use to
produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor.
Jeans
Corn
Country
(Pairs per hour of labor)
(Bushels per hour of labor)
Felicidad
16
Bellissima
6.
12
Initially, suppose Bellissima uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses
3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of
jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 corn it
produces.
Felicidad's opportunity cost of producing 1 pair of jeans is
of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is
v has a
v of corn. Therefore,
has a compárative advantage in the production of jeans, and
comparative advantage in the production of corn.
Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. In
million pairs per week, and the country that produces corn will produce
this case, the country that produces jeans will produce
million bushels per week.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn.
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Step 1
Answer:
Given,
Total hours available per week= 4 million labor hours
| Country | Jeans (pairs per hour of labor) | Corn (bushels per hour of labor) |
| Felicidad | 4 | 16 |
| Bellissima | 6 | 12 |
To find the total current production let us multiply the time devoted to each good's production by the quantity produced per hour:
| Country | Jeans (in millions) | Corn (in millions) |
| Felicidad | ||
| Bellissima |
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