Suppose there exist two imaginary countries, Everglades and Yosemite. Their labor forces are each capable of supplying four million hours per day that can be used to produce chinos, pistachios, or some combination of the two. The following table shows the amount of chinos or pistachios that can be produced by one hour of labor. Country Everglades Yosemite Chinos Pistachios (Pairs per hour of labor) (Pounds per hour of labor) 4 6 16 12 Suppose that initially Yosemite uses 1 million hours of labor per day to produce chinos and 3 million hours per day to produce pistachios, while Everglades uses 3 million hours of labor per day to produce chinos and 1 million-hours per day to produce pistachios. As a result, Everglades produces 12 million pairs of chinos and 16 million pounds of pistachios, and Yosemite produces 6 million pairs of chinos and 36 million pounds of pistachios. 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 chinos and pistachios it produces. Everglades's opportunity cost of producing 1 pair of chinos is chinos is of pistachios. Therefore, of pistachios, and Yosemite's opportunity cost of producing 1 pair of has a comparative advantage in the production of chinos, and has a comparative advantage in the production of pistachios. 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 chinos will produce million pairs per day, and the country that produces pistachios will produce million pounds per day. In the following table, enter each country's production decision on the third rou 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 chinos was 18 million pairs per day, and the total production of pistachios was 52 million pounds per day. Because of specialization, the total production of chinos has increased by million pairs per day, and the total production of pistachios has increased by million pounds per day. Because the two countries produce more chinos and more pistachios 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 Yosemite Chinos Pistachios S (Millions of pairs) (Millions of pounds) Chinos (Millions of pairs) Pistachios (Millions of pounds) Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption 12 16 6 36 12 16 6 36

ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
icon
Related questions
Question
Suppose there exist two imaginary countries, Everglades and Yosemite. Their labor forces are each capable of supplying four million hours per day that
can be used to produce chinos, pistachios, or some combination of the two. The following table shows the amount of chinos or pistachios that can be
produced by one hour of labor.
Country
Everglades
Yosemite
Chinos
Pistachios
(Pairs per hour of labor) (Pounds per hour of labor)
4
6
16
12
Suppose that initially Yosemite uses 1 million hours of labor per day to produce chinos and 3 million hours per day to produce pistachios, while
Everglades uses 3 million hours of labor per day to produce chinos and 1 million-hours per day to produce pistachios. As a result, Everglades produces
12 million pairs of chinos and 16 million pounds of pistachios, and Yosemite produces 6 million pairs of chinos and 36 million pounds of pistachios.
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 chinos and pistachios it produces.
Everglades's opportunity cost of producing 1 pair of chinos is
chinos is
of pistachios. Therefore,
of pistachios, and Yosemite's opportunity cost of producing 1 pair of
has a comparative advantage in the production of chinos, and
has a comparative advantage in the production of pistachios.
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 chinos will produce
million pairs per day, and the country that produces pistachios will produce
million pounds per day.
In the following table, enter each country's production decision on the third rou
Transcribed Image Text:Suppose there exist two imaginary countries, Everglades and Yosemite. Their labor forces are each capable of supplying four million hours per day that can be used to produce chinos, pistachios, or some combination of the two. The following table shows the amount of chinos or pistachios that can be produced by one hour of labor. Country Everglades Yosemite Chinos Pistachios (Pairs per hour of labor) (Pounds per hour of labor) 4 6 16 12 Suppose that initially Yosemite uses 1 million hours of labor per day to produce chinos and 3 million hours per day to produce pistachios, while Everglades uses 3 million hours of labor per day to produce chinos and 1 million-hours per day to produce pistachios. As a result, Everglades produces 12 million pairs of chinos and 16 million pounds of pistachios, and Yosemite produces 6 million pairs of chinos and 36 million pounds of pistachios. 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 chinos and pistachios it produces. Everglades's opportunity cost of producing 1 pair of chinos is chinos is of pistachios. Therefore, of pistachios, and Yosemite's opportunity cost of producing 1 pair of has a comparative advantage in the production of chinos, and has a comparative advantage in the production of pistachios. 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 chinos will produce million pairs per day, and the country that produces pistachios will produce million pounds per day. In the following table, enter each country's production decision on the third rou
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 chinos was 18 million pairs per day, and the total production of pistachios was 52
million pounds per day. Because of specialization, the total production of chinos has increased by
million pairs per day, and the total
production of pistachios has increased by
million pounds per day.
Because the two countries produce more chinos and more pistachios 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
Yosemite
Chinos
Pistachios
S
(Millions of pairs) (Millions of pounds)
Chinos
(Millions of pairs)
Pistachios
(Millions of pounds)
Without Trade
Production
Consumption
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
12
16
6
36
12
16
6
36
Transcribed Image Text: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 chinos was 18 million pairs per day, and the total production of pistachios was 52 million pounds per day. Because of specialization, the total production of chinos has increased by million pairs per day, and the total production of pistachios has increased by million pounds per day. Because the two countries produce more chinos and more pistachios 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 Yosemite Chinos Pistachios S (Millions of pairs) (Millions of pounds) Chinos (Millions of pairs) Pistachios (Millions of pounds) Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption 12 16 6 36 12 16 6 36
Expert Solution
trending now

Trending now

This is a popular solution!

steps

Step by step

Solved in 2 steps

Blurred answer
Similar questions
  • SEE MORE QUESTIONS
Recommended textbooks for you
ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
Economics
ISBN:
9780190931919
Author:
NEWNAN
Publisher:
Oxford University Press
Principles of Economics (12th Edition)
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
Managerial Economics: A Problem Solving Approach
Managerial Economics: A Problem Solving Approach
Economics
ISBN:
9781337106665
Author:
Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor
Publisher:
Cengage Learning
Managerial Economics & Business Strategy (Mcgraw-…
Managerial Economics & Business Strategy (Mcgraw-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education