Solve it on paper! Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of thetable. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").Without TradeProductionConsumptionWith TradeProductionTrade actionConsumptionGains from TradeIncrease in ConsumptionPistachios(Millions of pounds)2424SequoiaujuChinos(Millions of pairs)3232Pistachios(Millions of pounds)12Denali12Chinos(Millions of pairs)7272Tho Suppose there exist two imaginary countries, Sequoia and Denali. Their labor forces are each capable of supplying four million hours per week thatcan be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can beproduced by one hour of labor.PistachiosChinosCountry (Pounds per hour of labor) (Pairs per hour of labor)Sequoia32Denali81224Suppose that initially Denali uses 1 million hours of labor per week to produce pistachios and 3 million hours per week to produce chinos, whileSequoia uses 3 million hours of labor per week to produce pistachios and 1 million hours per week to produce chinos. As a result, Sequoia produces 24million pounds of pistachios and 32 million pairs of chinos, and Denali produces 12 million pounds of pistachios and 72 million pairs of chinos. Assumethere are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amountof pistachios and chinos it produces.Sequoia's opportunity cost of producing 1 pound of pistachios ispistachios isof chinos. Therefore,comparative advantage in the production of chinos.of chinos, and Denali's opportunity cost of producing 1 pound ofhas a comparative advantage in the production of pistachios, andSuppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. Inthis case, the country that produces pistachios will producemillion pounds per week, and the country that produces chinos will producemillion pairs per week.In the following table, enter each country's production decision on the third row of the table (marked "Production").has aSuppose the country that produces pistachios trades 26 million pounds of pistachios to the other country in exchange for 78 million pairs of chinos.In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action," andenter each country's final consumption of each good on the line marked "Consumption."When the two countries did not specialize, the total production of pistachios was 36 million pounds per week, and the total production of chinos was104 million pairs per week. Because of specialization, the total production of pistachios has increased bymillion pounds per week, and thetotal production of chinos has increased bymillion pairs per week.Because the two countries produce more pistachios and more chinos under specialization, each country is able to gain from trade.

Gains from trade arises when the country specializes in the production of the product which bring…

Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption"). Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Pistachios (Millions of pounds) 24 24 Sequoia 000 Chinos (Millions of pairs) 32 32 Denali Pistachios (Millions of pounds) 12 12 Chinos (Millions of pairs) 72 72 d'ab

Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption"). Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Pistachios (Millions of pounds) 24 24 Sequoia 000 Chinos (Millions of pairs) 32 32 Denali Pistachios (Millions of pounds) 12 12 Chinos (Millions of pairs) 72 72 d'ab

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Solve it on paper!

Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the
table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").
Without Trade
Production
Consumption
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
Pistachios
(Millions of pounds)
24
24
Sequoia
uju
Chinos
(Millions of pairs)
32
32
Pistachios
(Millions of pounds)
12
Denali
12
Chinos
(Millions of pairs)
72
72
Tho

Suppose there exist two imaginary countries, Sequoia and Denali. Their labor forces are each capable of supplying four million hours per week that
can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be
produced by one hour of labor.
Pistachios
Chinos
Country (Pounds per hour of labor) (Pairs per hour of labor)
Sequoia
32
Denali
8
12
24
Suppose that initially Denali uses 1 million hours of labor per week to produce pistachios and 3 million hours per week to produce chinos, while
Sequoia uses 3 million hours of labor per week to produce pistachios and 1 million hours per week to produce chinos. As a result, Sequoia produces 24
million pounds of pistachios and 32 million pairs of chinos, and Denali produces 12 million pounds of pistachios and 72 million pairs of chinos. Assume
there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount
of pistachios and chinos it produces.
Sequoia's opportunity cost of producing 1 pound of pistachios is
pistachios is
of chinos. Therefore,
comparative advantage in the production of chinos.
of chinos, and Denali's opportunity cost of producing 1 pound of
has a comparative advantage in the production of pistachios, and
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 pistachios will produce
million pounds per week, and the country that produces chinos will produce
million pairs per week.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
has a
Suppose the country that produces pistachios trades 26 million pounds of pistachios to the other country in exchange for 78 million pairs of chinos.
In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action," and
enter each country's final consumption of each good on the line marked "Consumption."
When the two countries did not specialize, the total production of pistachios was 36 million pounds per week, and the total production of chinos was
104 million pairs per week. Because of specialization, the total production of pistachios has increased by
million pounds per week, and the
total production of chinos has increased by
million pairs per week.
Because the two countries produce more pistachios and more chinos under specialization, each country is able to gain from trade.

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