Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Rye Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. 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 rye and jeans it produces. Bellissima's opportunity cost of producing 1 bushel of rye is of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative of jeans. Therefore, advantage in the production of jeans. 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 rye will produce million bushels per week, and the country that produces jeans 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). Suppose the country that produces rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans. In the foliowing 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 rye was 36 million bushels per week, and the total production of jeans was 104 million bushels per week, and the total million pairs per week. Because of specialization, the total production of rye has increased by million pairs per week. production of jeans has increased by Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade.
Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Rye Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. 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 rye and jeans it produces. Bellissima's opportunity cost of producing 1 bushel of rye is of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative of jeans. Therefore, advantage in the production of jeans. 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 rye will produce million bushels per week, and the country that produces jeans 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). Suppose the country that produces rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans. In the foliowing 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 rye was 36 million bushels per week, and the total production of jeans was 104 million bushels per week, and the total million pairs per week. Because of specialization, the total production of rye has increased by million pairs per week. production of jeans has increased by Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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