Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per week that they can use toproduce 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.JeansCornCountry(Pairs per hour of labor)(Bushels per hour of labor)Felicidad4.16Bellissima12Initially, suppose Bellissima uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs ofjeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. Assume there are no othercountries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of jeans and corn itproduces.Felicidad's opportunity cost of producing 1 pair of jeans isv of corn, and Bellissima's opportunity cost of producing 1 pair of jeans isv of corn. Therefore,has a comparative advantage in the production of jeans, andvhas acomparative 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. Inmillion pairs per week, and the country that produces corn will producethis case, the country that produces jeans will producemillion 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.MacBook Air Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn.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 jeans was 18 million pairs per week, and the total production of corn was 52 millionbushels per week. Because of specialization, the total production of jeans has increased bymillion pairs per week, and the total production ofA-Zcorn has increased bymillion bushels per week.Because the two countries produce more jeans and more com 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 thetable. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").FelicidadBellissimaJeansCornJeansCorn(Millions of pairs)(Millions of bushels)(Millions of pairs)(Millions of bushels)Without TradeProduction12166.36Consumption12166.36With TradeProductionTrade actionConsumptionGains from TradeIncrease in ConsumptionMacBook AirF9F10FBF7임 F3000000 F4ESF6escF2&delete#2$%9@6783452}PYQWERentO 9 2 41 O B

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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 4 16 Bellissima 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. of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is Felicidad's opportunity cost of producing 1 pair of jeans is v has a of corn. Therefore, has a comparative advantage in the production of jeans, and comparative advantage in the production of corn.

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC