3. Absolute and comparative advantageConsider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn,jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans.CornJeansCountry(Labor hours per bushel) (Labor hours per pair)Charisma8016Fiatstan2412has an absolute advantage in the production of corn, andhas an absolute advantage in the productionof jeans.Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses18,000 hours of labor per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to tradegoods, so in the absence of trade between these two countries, each country consumes the amount of com and jeans it produces.Charisma's opportunity cost of producing 1 bushel of corn isof jeans, and Fiatstan's opportunity cost of producing 1 bushel of com isof jeans. Therefore,has a comdvantage in the production of corn, andhas a comparative1/2 pairadvantage in the production of jeans.1/5 pairWhen neither country specializes, the total production of conbushels per week, and the total production of jeans is2 pairspairs per week.5 pairs 3. Absolute and comparative advantageConsider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn,jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of corn or 1 pair of jeans.CornJeansCountry(Labor hours per bushel) (Labor hours per pair)Charisma8016Fiatstan2412has an absolute advantage in the production of corn, andhas an absolute advantage in the productionof jeans.Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses18,000 hours of labor per week to produce corn and 54,000 hours per week to produce jeans. Assume there are no other countries willing to tradegoods, so in the absence of trade between these two countries, each country consumes the amount of corn and jeans it produces.Charisma's opportunity cost of producing 1 bushel of corn isof jeans, and Fiatstan's opportunity cost of producing 1 bushel of corn isof jeans. Therefore,has a comparative advantage in the production of corn, andhas a comparativeadvantage in the production of jeans.FiatstanWhen neither country specializes, the total production of corn isbushels per week, and the total Charisma jeans ispairs per week.

Name: 3. Absolute and comparative advantageConsider two neighboring island
Uploaded: 2022-12-02T21:52:30.000Z
Channel: Bartleby
Description: 3. Absolute and comparative advantageConsider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn,jeans, or a combination of both. The following table shows the amou