Suppose there exist two imaginary countries, Denali and Sequoia. Their labor forces are each capable of supplying four million hours per day that canbe used to produce almonds, shorts, or some combination of the two. The following table shows the amount of almonds or shorts that can beproduced by one hour of labor.AlmondsShortsCountry (Pounds per hour of labor) (Pairs per hour of labor)Denali16Sequoia20Suppose that initially Denall uses 1 million hours of labor per day to produce almonds and 3 million hours per day to produce shorts, while Sequoiauses 3 million hours of labor per day to produce almonds and 1 million hours per day to produce shorts. As a result, Denali produces 8 million poundsof almonds and 48 million pairs of shorts, and Sequoia produces 15 milion pounds of almonds and 20 million pairs of shorts. Assume there are noother countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of almondsand shortsit producesof shorts, and Sequoia's opportunity cost of producing 1 pound of almondshas a comparative advantage in the production of almonds, andhas a comparativeDenaif's opportunity cost of producing 1 pound of almonds isof shorts. Therefore,advantage in the production of shorts.Suppose 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 almonds will produce million pounds per day, and the country that produces shorts witproducemillion pairs per dayIn the following table, enter each country's production decision on the third row of the table (marked ProductionSuppose the country that produces almands trades 18 million pounds of almonds to the other country in exchange for 54 million pairs of shorts,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 almonds was 23 million pounds per day, and the total production of shorts was 68million pounds per day, and the totalmillion pairs per day. Because of specialization, the total production of almonds has increased by [production of shorts has increased bymillion pairs per day.Because the two countries produce more almonds and more shorts 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")Without TradeProductionConsumptionWith TradeProductionTrade actionConsumptionGains from TradeIncrease in ConsumptionDenaliAlmondsShorts(Millions of pounds) (Millions of pairs)SequoiaAlmondsShorts(Millions of pounds) (Millions of pairs)15152020

Comparative Advantage refers to the services that have a lower opportunity cost in comparison to…

Suppose there exist two imaginary countnes, Denali and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce almonds, shorts, or some combination of the two. The following table shows the amount of almends or shorts that can be produced by one hour of labor. Almonds Shorts Country (Pounds per hour of labor) (Pairs per hour of labor) Denali 16 Sequela 20 Suppose that initially Denall uses 1 million hours of labor per day to produce almonds and 3 millian hours per day to produce shorts, while Sequoia uses 3 million hours of labor per day to produce almonds and 1 million hours per day to produce shorts. As a result, Denali produces 8 million pounds of almonds and 46 million pairs of shorts, and Sequoia produces 15 mition pounds of almonds and 20 million pairs of shorts. 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 almonds and shorts et produces Denal's opportunity cost of producing 1 pound of aimonds is of shorts. Therefore, advantage in the production of shorts. of shorts, and Sequoia's opportunity cost of producing 1 pound of almonds has a comparative advantage in the production of almonds, and has a comparative 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 almonds will produce million pounds per day, and the country that produces shorts 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 almands trades 18 milion pounds of almonds to the other country in exchange for 54 million pairs of shorts. 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