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Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade - Increase in Consumption Denali Shorts Almonds (Millions of pairs) (Millions of pounds) 48 48 Congaree Shorts (Millions of pairs) 15 15 Almonds (Millions of pounds) 20 20

Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade - Increase in Consumption Denali Shorts Almonds (Millions of pairs) (Millions of pounds) 48 48 Congaree Shorts (Millions of pairs) 15 15 Almonds (Millions of pounds) 20 20

ENGR.ECONOMIC ANALYSIS
ENGR.ECONOMIC ANALYSIS
14th Edition
ISBN:9780190931919
Author:NEWNAN
Publisher:NEWNAN
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Shorts Almonds Country (Pairs per hour of labor) (Pounds per hour of labor) Denali 8 Congaree 16 20 Suppose that initially Denah uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Congaree uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Denali produces 8 million pairs of shorts and 48 million pounds of almonds, and Congaree produces 15 million pairs of shorts and 20 million pounds of almonds. 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 shorts and almonds it produces Denal's opportunity cost of producing 1 pair of shorts is 2 pounds of almonds, and Congaree's opportunity cost of producing 1 pair of shorts is 4 pounds of almonds. Therefore, Denali has a comparative advantage in the production of shorts, and Congaree has a comparative advantage in the production of almonds. 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 shorts will produce 32 million pairs per day, and the country that produces almonds will produce 80 kica snimde nor 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 shorts trades 18 million pairs of shorts to the other country in exchange for 54 million pounds of almonds. 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 shorts was 23 million pairs per day, and the total production of almonds was 68 million pounds per day. Because of specialization, the total production of shorts has increased by million pairs per day, and the total production of almonds has increased by million pounds per day. Because the two countries produce more shorts and more almonds 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).
Transcribed Image Text:Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Shorts Almonds Country (Pairs per hour of labor) (Pounds per hour of labor) Denali 8 Congaree 16 20 Suppose that initially Denah uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Congaree uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Denali produces 8 million pairs of shorts and 48 million pounds of almonds, and Congaree produces 15 million pairs of shorts and 20 million pounds of almonds. 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 shorts and almonds it produces Denal's opportunity cost of producing 1 pair of shorts is 2 pounds of almonds, and Congaree's opportunity cost of producing 1 pair of shorts is 4 pounds of almonds. Therefore, Denali has a comparative advantage in the production of shorts, and Congaree has a comparative advantage in the production of almonds. 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 shorts will produce 32 million pairs per day, and the country that produces almonds will produce 80 kica snimde nor 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 shorts trades 18 million pairs of shorts to the other country in exchange for 54 million pounds of almonds. 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 shorts was 23 million pairs per day, and the total production of almonds was 68 million pounds per day. Because of specialization, the total production of shorts has increased by million pairs per day, and the total production of almonds has increased by million pounds per day. Because the two countries produce more shorts and more almonds 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).
Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Denali Shorts Almonds Shorts Almonds (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) 48 48 Congaree 15 15 20 20
Transcribed Image Text:Without Trade Production Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Denali Shorts Almonds Shorts Almonds (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) 48 48 Congaree 15 15 20 20
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