Practice: Their labor forces are each capable of supplying four million hours per week that can be used to produce shorts, almonds, or some combination of the two. Country Shorts Almonds (Pairs per hour of labor) (Pounds per hour of labor) Everglades 4 16 Denali 5 10 Suppose that initially Denali uses 1 million hours of labor per week to produce shorts and 3 million hours per week to produce almonds, while Everglades uses 3 million hours of labor per week to produce shorts and 1 million hours per week to produce almonds. As a result, Everglades produces 12 million pairs of shorts and 16 million pounds of almonds, and Denali produces 5 million pairs of shorts and 30 million pounds of almonds. 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 shorts and almonds it produces. Everglades's opportunity cost of producing 1 pair of shorts is4 pounds of almonds, and Denali's opportunity cost of producing 1 pair of shorts is2 pounds of almonds. Therefore,Denali has a comparative advantage in the production of shorts, andEverglades has a comparative advantage in the production of almonds. 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 shorts will produce million pairs per week, and the country that produces almonds will produce million pounds 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 shorts trades 13 million pairs of shorts to the other country in exchange for 39 million pounds of almonds. When the two countries did not specialize, the total production of shorts was 17 million pairs per week, and the total production of almonds was 46 million pounds per week. Because of specialization, the total production of shorts has increased by million pairs per week, and the total production of almonds has increased by million pounds per week. Because the two countries produce more shorts and more almonds 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”). Everglades Denali Shorts Almonds Shorts Almonds (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) Without Trade Production 12 16 5 30 Consumption 12 16 5 30 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption

Practice: Their labor forces are each capable of supplying four million hours per week that can be used to produce shorts, almonds, or some combination of the two. Country Shorts Almonds (Pairs per hour of labor) (Pounds per hour of labor) Everglades 4 16 Denali 5 10 Suppose that initially Denali uses 1 million hours of labor per week to produce shorts and 3 million hours per week to produce almonds, while Everglades uses 3 million hours of labor per week to produce shorts and 1 million hours per week to produce almonds. As a result, Everglades produces 12 million pairs of shorts and 16 million pounds of almonds, and Denali produces 5 million pairs of shorts and 30 million pounds of almonds. 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 shorts and almonds it produces. Everglades's opportunity cost of producing 1 pair of shorts is4 pounds of almonds, and Denali's opportunity cost of producing 1 pair of shorts is2 pounds of almonds. Therefore,Denali has a comparative advantage in the production of shorts, andEverglades has a comparative advantage in the production of almonds. 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 shorts will produce million pairs per week, and the country that produces almonds will produce million pounds 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 shorts trades 13 million pairs of shorts to the other country in exchange for 39 million pounds of almonds. When the two countries did not specialize, the total production of shorts was 17 million pairs per week, and the total production of almonds was 46 million pounds per week. Because of specialization, the total production of shorts has increased by million pairs per week, and the total production of almonds has increased by million pounds per week. Because the two countries produce more shorts and more almonds 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”). Everglades Denali Shorts Almonds Shorts Almonds (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) Without Trade Production 12 16 5 30 Consumption 12 16 5 30 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption

Principles of Economics (MindTap Course List)

8th Edition

ISBN:9781305585126

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter18: The Markets For The Factor Of Production

Section: Chapter Questions

Problem 5PA

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Related questions

Question

Practice:

Their labor forces are each capable of supplying four million hours per week that can be used to produce shorts, almonds, or some combination of the two.

Country	Shorts	Almonds
(Pairs per hour of labor)	(Pounds per hour of labor)
Everglades	4	16
Denali	5	10

Suppose that initially Denali uses 1 million hours of labor per week to produce shorts and 3 million hours per week to produce almonds, while Everglades uses 3 million hours of labor per week to produce shorts and 1 million hours per week to produce almonds. As a result, Everglades produces 12 million pairs of shorts and 16 million pounds of almonds, and Denali produces 5 million pairs of shorts and 30 million pounds of almonds. 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 shorts and almonds it produces.

Everglades's opportunity cost of producing 1 pair of shorts is4 pounds of almonds, and Denali's opportunity cost of producing 1 pair of shorts is2 pounds of almonds. Therefore,Denali has a comparative advantage in the production of shorts, andEverglades has a comparative advantage in the production of almonds.

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 shorts will produce

million pairs per week, and the country that produces almonds will produce

million pounds 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 shorts trades 13 million pairs of shorts to the other country in exchange for 39 million pounds of almonds.

When the two countries did not specialize, the total production of shorts was 17 million pairs per week, and the total production of almonds was 46 million pounds per week. Because of specialization, the total production of shorts has increased by

million pairs per week, and the total production of almonds has increased by

million pounds per week.

Because the two countries produce more shorts and more almonds 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”).

	Everglades	Denali
Shorts	Almonds	Shorts	Almonds
(Millions of pairs)	(Millions of pounds)	(Millions of pairs)	(Millions of pounds)
Without Trade
Production	12	16	5	30
Consumption	12	16	5	30
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption

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