# 2. Gains from tradeConsider two neighboring island countries called Felicidad and Bellissima. They each have 4 millionlabor hours available per week that they can use to produce rye, jeans, or a combination of both.The following table shows the amount of rye or jeans that can be produced using 1 hour of labor.Rye(Bushels per hour of labor)Jeans(Pairs per hour of labor)CountryFelicidad20Bellissima16Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 millionhours per week to produce jeans, while Felicidad uses 3 million hours of labor per week to producerye and 1 million hours per week to produce jeans. Consequently, Felicidad produces 15 millionbushels of rye and 20 million pairs of jeans, and Bellissima produces 8 million bushels of rye and 48million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absenceof trade between these two countries, each country consumes the amount of rye and jeans itproduces.Felicidad's opportunity cost of producing 1 bushel of rye isopportunity cost of producing 1 bushel of rye iscomparative advantage in the production of rye, andthe production of jeans.of jeans, and Bellissima'sv has aof jeans. Therefore,has a comparative advantage inSuppose that each country completely specializes in the production of the good in which it has acomparative advantage, producing only that good. In this case, the country that produces rye willproducemillion pairs per week.million bushels per week, and the country that produces jeans will produceIn the following table, enter each country's production decision on the third row of the table(marked "Production").Suppose the country that produces rye trades 18 million bushels of rye to the other country inexchange for 54 million pairs of jeans.In the following table, select the amount of each good that each country exports and imports in theboxes across the row marked "Trade Action," and enter each country's final consumption of eachgood on the line marked "Consumption."When the two countries did not specialize, the total production of rye was 23 million bushels perweek, and the total production of jeans was 68 million pairs per week. Because of specialization, thetotal production of rye has increased by million bushels per week, and the total production ofjeans has increased bymillion pairs per week.Because the two countries produce more rye and more jeans under specialization, each country isable to gain from trade.Calculate the gains from trade-that is, the amount by which each country has increased itsconsumption of each good relative to the first row of the table. In the following table, enter thisdifference in the boxes across the last row (marked "Increase in Consumption"). FelicidadBellissimaJeans(Millions ofpairs)Rye(Millions ofbushels)Rye(Millions ofbushels)Jeans(Millions ofpairs)Without TradeProduction484815208ConsumptionWith Trade15208ProductionTrade actionConsumptionGains from TradeIncrease inConsumption

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Asked Jan 30, 2020
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Needing some help on these problems! Thank you in advance.

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