Pistachios Country (Pounds per hour of labor) Sequoia Denali 5 8 Chinos (Pairs per hour of labor) 20 16 Suppose that initially Denali uses 1 million hours of labor per day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of labor per day to produce pistachios and 1 million hours per day to produce chinos. As a result, Sequoia produces 15 million pounds of pistachios and 20 million pairs of chinos, and Denali produces 8 million pounds of pistachios and 48 million pairs of chinos. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of pistachios and chinos it produces. Sequoia's opportunity cost of producing 1 pound of pistachios is pistachios is of chinos. Therefore, comparative advantage in the production of chinos. of chinos, and Denali's opportunity cost of producing 1 pound of has a comparative advantage in the production of pistachios, and has a 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 pistachios will produce million pounds per day, and the country that produces chinos will produce
Pistachios Country (Pounds per hour of labor) Sequoia Denali 5 8 Chinos (Pairs per hour of labor) 20 16 Suppose that initially Denali uses 1 million hours of labor per day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia uses 3 million hours of labor per day to produce pistachios and 1 million hours per day to produce chinos. As a result, Sequoia produces 15 million pounds of pistachios and 20 million pairs of chinos, and Denali produces 8 million pounds of pistachios and 48 million pairs of chinos. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of pistachios and chinos it produces. Sequoia's opportunity cost of producing 1 pound of pistachios is pistachios is of chinos. Therefore, comparative advantage in the production of chinos. of chinos, and Denali's opportunity cost of producing 1 pound of has a comparative advantage in the production of pistachios, and has a 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 pistachios will produce million pounds per day, and the country that produces chinos will produce
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Question
mj
subject-Ecconomics
Transcribed Image Text:produced by one hour of labor.
Country
Sequoia
Denali
Pistachios
Chinos
(Pounds per hour of labor) (Pairs per hour of labor)
5
20
16
Suppose that initially Denali uses 1 million hours of labor per day to produce pistachios and 3 million hours per day to produce chinos, while Sequoia
uses 3 million hours of labor per day to produce pistachios and 1 million hours per day to produce chinos. As a result, Sequoia produces 15 million
pounds of pistachios and 20 million pairs of chinos, and Denali produces 8 million pounds of pistachios and 48 million pairs of chinos. Assume there
are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of
pistachios and chinos it produces.
Sequoia's opportunity cost of producing 1 pound of pistachios is
pistachios is
of chinos. Therefore,
comparative advantage in the production of chinos.
of chinos, and Denali's opportunity cost of producing 1 pound of
has a comparative advantage in the production of pistachios, and
has a
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 pistachios will produce million pounds per day, and the country that produces chinos will produce
million pairs per day.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
Suppose the country that produces pistachios trades 18 million pounds of pistachios to the other country in exchange for 54 million pairs of chinos.
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 pistachios was 23 million pounds per day, and the total production of chinos was 68
million pairs per day. Because of specialization, the total production of pistachios has increased by million pounds per day, and the total
production of chinos has increased by
million pairs per day.
Because the two countries produce more pistachios and more chinos under specialization, each country is able to gain from trade.
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