Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of labor) (Bushels per hour of labor) Felicidad 4 16 Bellissima 6 12 Initially, suppose Bellissima uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 jeans and corn it produces. Felicidad's opportunity cost of producing 1 pair of jeans is v of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is v of corn. Therefore, has a comparative advantage in the production of jeans, and v has a comparative advantage in the production of corn. 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 jeans will produce million pairs per week, and the country that produces corn will produce million bushels per week. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn.
Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of labor) (Bushels per hour of labor) Felicidad 4 16 Bellissima 6 12 Initially, suppose Bellissima uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 jeans and corn it produces. Felicidad's opportunity cost of producing 1 pair of jeans is v of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is v of corn. Therefore, has a comparative advantage in the production of jeans, and v has a comparative advantage in the production of corn. 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 jeans will produce million pairs per week, and the country that produces corn will produce million bushels per week. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn.
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
Transcribed Image Text:Consider two neighboring island countries called Felicidad and Bellissima. They each have 4 million labor hours available per week that they can use to
produce jeans, corn, or a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor.
Jeans
Corn
Country
(Pairs per hour of labor)
(Bushels per hour of labor)
Felicidad
4
16
Bellissima
12
Initially, suppose Bellissima uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Felicidad uses
3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Felicidad produces 12 million pairs of
jeans and 16 million bushels of corn, and Bellissima produces 6 million pairs of jeans and 36 million bushels of corn. 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 jeans and corn it
produces.
Felicidad's opportunity cost of producing 1 pair of jeans is
of corn, and Bellissima's opportunity cost of producing 1 pair of jeans is
v of corn. Therefore,
has a comparative advantage in the production of jeans, and
v has a
comparative advantage in the production of corn.
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 jeans will produce
million pairs per week, and the country that produces corn will produce
million bushels per week.
In the following table, enter each country's production decision on the third row of the table (marked "Production").
Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 million bushels of corn.
Transcribed Image Text:Jupposc aie counay uiat prouuces jeams uaucs o pans o Jcans w uIe vIer courTuy rCACIanye TOrZ IOT DUSICIS Or Com.
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 jeans was 18 million pairs per week, and the total production of corn was 52 million
bushels per week. Because of specialization, the total production of jeans has increased by
million pairs per week, and the total production of
corn has increased by
million bushels per week.
Because the two countries produce more jeans and more corn 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").
Felicidad
Bellissima
Jeans
Corn
Jeans
Corn
(Millions of pairs)
(Millions of bushels)
(Millions of pairs)
(Millions of bushels)
Without Trade
Production
12
16
6
36
Consumption
12
16
6
36
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
COO
Expert Solution
This question has been solved!
Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.
Step by step
Solved in 3 steps with 1 images
Knowledge Booster
Learn more about
Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.Recommended textbooks for you
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
Engineering Economy (17th Edition)
Economics
ISBN:
9780134870069
Author:
William G. Sullivan, Elin M. Wicks, C. Patrick Koelling
Publisher:
PEARSON
Principles of Economics (12th Edition)
Economics
ISBN:
9780134078779
Author:
Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher:
PEARSON
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)
Economics
ISBN:
9781305585126
Author:
N. Gregory Mankiw
Publisher:
Cengage Learning
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-…
Economics
ISBN:
9781259290619
Author:
Michael Baye, Jeff Prince
Publisher:
McGraw-Hill Education