Two neighboring island nations, Seychelles and Mauritius, produce iPad's, coffee, or a combination of both. Suppose that they each have 4 million labor hours available per week for production. The following table gives the amount of each product that can be produced using one hour of labor: Country Mauritius Seychelles Mauritius' opportunity cost of produing 1 iPad is iPads (per hour of labor) 12 of coffee. Therefore, 8 Initially, suppose Mauritius uses 1 million hours per week to produce iPads and 3 million hours per week to produce coffee, while Seycheles uses 3 million hours of labor per week to produce iPads and 1 million hours per week to produce coffee. Consequently, Mauritius produces 12 million iPads and 72 million pounds of coffee, and Seychelles produces 24 million iPads and 32 million pounds of coffee. Assume there are no other countries willing to trade with them. So, if Mauritius and Seychelles don't trade with each other, they can only consume what they can produce using their own labor. Coffee (lbs. per hour of labor) 24 32 of coffee, and Seychelles' opportunity cost of producing 1 iPad is has a comparative advantage in the production of iPads, and has a comparative advantage in the production of coffee. Finally, suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. Then suppose that the country that produces iPads trades 26 million iPads to the other country for 78 million pounds of coffee. This country will have iPads leftover, and the other country will have pounds of coffee leftover to consume.
Two neighboring island nations, Seychelles and Mauritius, produce iPad's, coffee, or a combination of both. Suppose that they each have 4 million labor hours available per week for production. The following table gives the amount of each product that can be produced using one hour of labor: Country Mauritius Seychelles Mauritius' opportunity cost of produing 1 iPad is iPads (per hour of labor) 12 of coffee. Therefore, 8 Initially, suppose Mauritius uses 1 million hours per week to produce iPads and 3 million hours per week to produce coffee, while Seycheles uses 3 million hours of labor per week to produce iPads and 1 million hours per week to produce coffee. Consequently, Mauritius produces 12 million iPads and 72 million pounds of coffee, and Seychelles produces 24 million iPads and 32 million pounds of coffee. Assume there are no other countries willing to trade with them. So, if Mauritius and Seychelles don't trade with each other, they can only consume what they can produce using their own labor. Coffee (lbs. per hour of labor) 24 32 of coffee, and Seychelles' opportunity cost of producing 1 iPad is has a comparative advantage in the production of iPads, and has a comparative advantage in the production of coffee. Finally, suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. Then suppose that the country that produces iPads trades 26 million iPads to the other country for 78 million pounds of coffee. This country will have iPads leftover, and the other country will have pounds of coffee leftover to consume.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Transcribed Image Text:Two
neighboring island nations, Seychelles and Mauritius, produce iPad's, coffee, or a combination of both. Suppose that they each have 4 million labor hours available
per week for production. The following table gives the amount of each product that can be produced using one hour of labor:
Country
Mauritius
Seychelles
Mauritius' opportunity cost of produing 1 iPad is
iPads (per hour of labor)
12
of coffee. Therefore,
8
Initially, suppose Mauritius uses 1 million hours per week to produce iPads and 3 million hours per week to produce coffee, while Seycheles uses 3 million hours of labor
per week to produce iPads and 1 million hours per week to produce coffee. Consequently, Mauritius produces 12 million iPads and 72 million pounds of coffee, and
Seychelles produces 24 million iPads and 32 million pounds of coffee. Assume there are no other countries willing to trade with them. So, if Mauritius and Seychelles
don't trade with each other, they can only consume what they can produce using their own labor.
Coffee (lbs. per hour of labor)
24
32
of coffee, and Seychelles' opportunity cost of producing 1 iPad is
has a comparative advantage in the production of iPads, and
has a comparative advantage in the production of coffee.
Finally, suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. Then suppose
that the country that produces iPads trades 26 million iPads to the other country for 78 million pounds of coffee. This country will have
iPads leftover, and the other country will have
pounds of coffee leftover to consume.
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