Note:-Do not provide handwritten solution. Maintain accuracy and quality in your answer. Take care of plagiarism.Answer completely.You will get up vote for sure. 3. Comparative advantage and gains from tradeConsider two neighboring island countries called Felicidad and Arcadia. They each have 4 million labor hours available per week that they can use toproduce com, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor.CornJeansCountry (Bushels per hour of labor) (Pairs per hour of labor)Felicidad520Arcadia16Initially, suppose Arcadia uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Felicidad uses 3million hours of labor per week to produce com and 1 million hours per week to produce jeans. Consequently, Felicidad produces 15 million bushels ofcorn and 20 million pairs of jeans, and Arcadia produces 8 million bushels of corn and 48 million pairs of jeans. Assume there are no other countrieswilling to trade goods, so in the absence of trade between these two countries, each country consumes the amount of corn and jeans it produces.Felicidad's opportunity cost of producing 1 bushel of corn isof jeans. Therefore,advantage in the production of jeans.of jeans, and Arcadia's opportunity cost of producing 1 bushel of corn ishas a comparative advantage in the production of com, andhas a comparativeSuppose 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 corn will produce i million bushels per week, and the country that produces jeans will producemillion pairs per week. In the following table, enter each country's production decision on the third row of the table (labeled "Production").FelicidadArcadiaWithout TradeProductionConsumptionWith TradeProductionImports/ExportsConsumptionGains from TradeIncrease in ConsumptionCornJeansCorn(Millions of bushels) (Millions of pairs) (Millions of bushels)1515202088Jeans(Millions of pairs)4848Suppose the country that produces com trades 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans.In the previous table, use the dropdown menus across the row labeled "Imports/Exports" to select the pmount of each good that each country importsand exports. Then enter each country's final consumption of each good on the line labeled "Consumption."When the two countries did not specialize, the total production of corn was 23 million bushels per week, and the total production of jeans was 68million pairs per week. Because of specialization, the total production of corn has increased by million bushels per week, and the totalproduction of jeans has increased bymillion pairs per week.Because the two countries produce more corn and more jeans under specialization, each country is able to gain from trade.

Comparative advantage refers to the ability to produce goods and services at a lower opportunity…

In the following table, enter each country's production decision on the third row of the table (labeled "Production"). Felicidad Arcadia Without Trade Production Consumption With Trade Production Imports/Exports Consumption Gains from Trade Increase in Consumption Corn (Millions of bushels) 15 15 Jeans Corn (Millions of pairs) (Millions of bushels) 20 20 8 8 Jeans (Millions of pairs) 48 48 Suppose the country that produces com trades 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans. In the previous table, use the dropdown menus across the row labeled "Imports/Exports" to select the pmount of each good that each country imports and exports. Then enter each country's final consumption of each good on the line labeled "Consumption." When the two countries did not specialize, the total production of corn was 23 million bushels per week, and the total production of jeans was 68 million pairs per week. Because of specialization, the total production of corn has increased by million bushels per week, and the total production of jeans has increased by million pairs per week. Because the two countries produce more corn and more jeans under specialization, each country is able to gain from trade.

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC