When the two countries did not specialize, the total production of corn was 23 million bushels per month, and the total production of jeans was 68 million pairs per month. Because of specialization, the total production of corn has increased by million bushels per month, and the total production of jeans has increased by million pairs per month.
When the two countries did not specialize, the total production of corn was 23 million bushels per month, and the total production of jeans was 68 million pairs per month. Because of specialization, the total production of corn has increased by million bushels per month, and the total production of jeans has increased by million pairs per month.
Principles Of Marketing
17th Edition
ISBN:9780134492513
Author:Kotler, Philip, Armstrong, Gary (gary M.)
Publisher:Kotler, Philip, Armstrong, Gary (gary M.)
Chapter1: Marketing: Creating Customer Value And Engagement
Section: Chapter Questions
Problem 1.1DQ
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Question
I'm not quite understanding this problem, so if you could explain how you got your numbers based on calculations, that would be great! Thanks!
![Because the two countries produce more corn and more jeans 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").
Contente
Dolorium
Corn
Jeans
Corn
Jeans
(Millions of bushels)
(Millions of pairs)
(Millions of bushels)
(Millions of pairs)
Without Trade
Production
8
48
15
20
Consumption
8
48
15
20
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F724eb754-2b50-41ef-baeb-d9687acf2531%2F8f1a020e-0767-4a75-82cd-64c13efe53b2%2Fchlwv8n_processed.png&w=3840&q=75)
Transcribed Image Text:Because the two countries produce more corn and more jeans 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").
Contente
Dolorium
Corn
Jeans
Corn
Jeans
(Millions of bushels)
(Millions of pairs)
(Millions of bushels)
(Millions of pairs)
Without Trade
Production
8
48
15
20
Consumption
8
48
15
20
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
![3. Gains from trade
Consider two neighboring island countries called Contente and Dolorium. They each have 4 million labor hours available per month that they can use
to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor.
Corn
Jeans
Country
(Bushels per hour of labor)
(Pairs per hour of labor)
Contente
8
16
Dolorium
5
20
Initially, suppose Contente uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Dolorium
uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Contente produces 8 million
bushels of corn and 48 million pairs of jeans, and Dolorium produces 15 million bushels of corn and 20 million pairs of jeans. Assume there are no
other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of corn and jeans
it produces.
Contente's opportunity cost of producing 1 bushel of corn is
of jeans, and Dolorium's opportunity cost of producing 1 bushel of corn is
of jeans. Therefore,
has a comparative advantage in the production of corn, and
has a comparative
advantage in the production of jeans.
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 corn will produce
million bushels per month, and the country that produces jeans will produce
million pairs per month.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
Suppose the country that produces corn trades 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans.
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
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 corn was 23 million bushels per month, and the total production of jeans was 68
million pairs per month. Because of specialization, the total production of corn has increased by
million bushels per month, and the total
production of jeans has increased by
million pairs per month.](/v2/_next/image?url=https%3A%2F%2Fcontent.bartleby.com%2Fqna-images%2Fquestion%2F724eb754-2b50-41ef-baeb-d9687acf2531%2F8f1a020e-0767-4a75-82cd-64c13efe53b2%2Fo46c7kh_processed.png&w=3840&q=75)
Transcribed Image Text:3. Gains from trade
Consider two neighboring island countries called Contente and Dolorium. They each have 4 million labor hours available per month that they can use
to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor.
Corn
Jeans
Country
(Bushels per hour of labor)
(Pairs per hour of labor)
Contente
8
16
Dolorium
5
20
Initially, suppose Contente uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Dolorium
uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Contente produces 8 million
bushels of corn and 48 million pairs of jeans, and Dolorium produces 15 million bushels of corn and 20 million pairs of jeans. Assume there are no
other countries willing to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of corn and jeans
it produces.
Contente's opportunity cost of producing 1 bushel of corn is
of jeans, and Dolorium's opportunity cost of producing 1 bushel of corn is
of jeans. Therefore,
has a comparative advantage in the production of corn, and
has a comparative
advantage in the production of jeans.
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 corn will produce
million bushels per month, and the country that produces jeans will produce
million pairs per month.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
Suppose the country that produces corn trades 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans.
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
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 corn was 23 million bushels per month, and the total production of jeans was 68
million pairs per month. Because of specialization, the total production of corn has increased by
million bushels per month, and the total
production of jeans has increased by
million pairs per month.
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