Consider two neighboring island countries called Contente and Dolorium. 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) Contente 12 24 Dolorium 32 Initially, suppose Contente uses 1 million hours of labor per week to produce jeans and 3 million hours per week produce corn, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corm. Consequently, Contente produces 12 million pairs of jeans and 72 million bushels of corn, and Dolorium produces 24 million pairs of jeans and 32 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. Contente's opportunity cost of producing 1 pair of jeans is of corn, and Dolorium's opportunity cost of producing 1 pair of jeans is of corn. Therefore, has a comparative advantage in the production of jeans, and has a comparative advantage in the production of com. 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 26 million pairs of jeans to the other country in exchange for 78 million bushels of con. 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 jeans was 36 million pairs per week, and the total production of corn was 104 million bushels per week. Because of specialization, the total production of jeans has increased by million pairs per week, and the total production of corn has increased by million bushels per week. Because the two countries produce more jeans and more corn under specialization, each country is able to gain from trade. 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"). Contente Dolorium Jeans Corn Jeans Corn (Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels) Without Trade Production 12 72 24 32 Consumption 12 72 24 32 With Trade Production Trade Action Consumption Gains from Trade Increase in Consumption

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Consider two neighboring island countries called Contente and Dolorium. 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.

Consider two neighboring island countries called Contente and Dolorium. 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)
Contente
12
24
Dolorium
32
Initially, suppose Contente uses 1 million hours of labor per week to produce jeans and 3 million hours per week
produce corn, while Dolorium uses 3
million hours of labor per week to produce jeans and 1 million hours per week to produce corm. Consequently, Contente produces 12 million pairs of
jeans and 72 million bushels of corn, and Dolorium produces 24 million pairs of jeans and 32 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.
Contente's opportunity cost of producing 1 pair of jeans is
of corn, and Dolorium's opportunity cost of producing 1 pair of jeans
is
of corn. Therefore,
has a comparative advantage in the production of jeans, and
has a comparative
advantage in the production of com.
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 26 million pairs of jeans to the other country in exchange for 78 million bushels of con.
Transcribed Image Text:Consider two neighboring island countries called Contente and Dolorium. 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) Contente 12 24 Dolorium 32 Initially, suppose Contente uses 1 million hours of labor per week to produce jeans and 3 million hours per week produce corn, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corm. Consequently, Contente produces 12 million pairs of jeans and 72 million bushels of corn, and Dolorium produces 24 million pairs of jeans and 32 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. Contente's opportunity cost of producing 1 pair of jeans is of corn, and Dolorium's opportunity cost of producing 1 pair of jeans is of corn. Therefore, has a comparative advantage in the production of jeans, and has a comparative advantage in the production of com. 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 26 million pairs of jeans to the other country in exchange for 78 million bushels of con.
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 jeans was 36 million pairs per week, and the total production of corn was 104 million
bushels per week. Because of specialization, the total production of jeans has increased by
million pairs per week, and the total production of
corn has increased by
million bushels per week.
Because the two countries produce more jeans and more corn under specialization, each country is able to gain from trade.
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").
Contente
Dolorium
Jeans
Corn
Jeans
Corn
(Millions of pairs)
(Millions of bushels)
(Millions of pairs)
(Millions of bushels)
Without Trade
Production
12
72
24
32
Consumption
12
72
24
32
With Trade
Production
Trade Action
Consumption
Gains from Trade
Increase in Consumption
Transcribed Image Text: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 jeans was 36 million pairs per week, and the total production of corn was 104 million bushels per week. Because of specialization, the total production of jeans has increased by million pairs per week, and the total production of corn has increased by million bushels per week. Because the two countries produce more jeans and more corn under specialization, each country is able to gain from trade. 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"). Contente Dolorium Jeans Corn Jeans Corn (Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels) Without Trade Production 12 72 24 32 Consumption 12 72 24 32 With Trade Production Trade Action Consumption Gains from Trade Increase in Consumption
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