Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. Country Yosemite Sequoia Pistachios (Pounds per hour of labor) 8 5 Chinos (Pairs per hour of labor) 16 20 Suppose that initially Yosemite 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, Yosemite produces 8 million pounds of pistachios and 48 million pairs of chinos, and Sequoia produces 15 million pounds of pistachios and 20 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. Yosemite's opportunity cost of producing 1 pound of pistachios is pistachios is of chinos. Therefore, a comparative advantage in the production of chinos. of chinos, and Sequoia's opportunity cost of producing 1 pound of has a comparative advantage in the production of pistachios, and has 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.
Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor forces are each capable of supplying four million hours per day that can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor. Country Yosemite Sequoia Pistachios (Pounds per hour of labor) 8 5 Chinos (Pairs per hour of labor) 16 20 Suppose that initially Yosemite 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, Yosemite produces 8 million pounds of pistachios and 48 million pairs of chinos, and Sequoia produces 15 million pounds of pistachios and 20 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. Yosemite's opportunity cost of producing 1 pound of pistachios is pistachios is of chinos. Therefore, a comparative advantage in the production of chinos. of chinos, and Sequoia's opportunity cost of producing 1 pound of has a comparative advantage in the production of pistachios, and has 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.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Suppose there exist two imaginary countries, Yosemite and Sequoia. Their labor forces are each capable of supplying four million hours per day that
can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be
produced by one hour of labor.
Country
Yosemite
Sequoia
Pistachios
(Pounds per hour of labor)
8
5
Chinos
(Pairs per hour of labor)
16
20
Suppose that initially Yosemite 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, Yosemite produces 8
million pounds of pistachios and 48 million pairs of chinos, and Sequoia produces 15 million pounds of pistachios and 20 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.
Yosemite's opportunity cost of producing 1 pound of pistachios is
pistachios is
of chinos. Therefore,
a comparative advantage in the production of chinos.
of chinos, and Sequoia's opportunity cost of producing 1 pound of
has a comparative advantage in the production of pistachios, and
has
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.
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