Consider two neighboring island countries called Arcadia and Dolorium. 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. Country Arcadia Dolorium Jeans Corn (Pairs per hour of labor) (Bushels per hour of labor) 8 16 5 20 Initially, suppose Arcadia uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Arcadia produces 8 million pairs of jeans and 48 million bushels of corn, and Dolorium produces 15 million pairs of jeans and 20 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. Arcadia's opportunity cost of producing 1 pair of jeans is of corn. Therefore, advantage in the production of corn. of corn, and Dolorium's opportunity cost of producing 1 pair of jeans is has a comparative advantage the production of jeans, and has a comparative
Consider two neighboring island countries called Arcadia and Dolorium. 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. Country Arcadia Dolorium Jeans Corn (Pairs per hour of labor) (Bushels per hour of labor) 8 16 5 20 Initially, suppose Arcadia uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Arcadia produces 8 million pairs of jeans and 48 million bushels of corn, and Dolorium produces 15 million pairs of jeans and 20 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. Arcadia's opportunity cost of producing 1 pair of jeans is of corn. Therefore, advantage in the production of corn. of corn, and Dolorium's opportunity cost of producing 1 pair of jeans is has a comparative advantage the production of jeans, and has a comparative
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter33: International Trade
Section: Chapter Questions
Problem 8RQ: What is absolute advantage? What is comparative advantage?
Related questions
Question
Expert Solution
Step 1
Since you have posted multiple sub-parts, we are answering the first three for you. If you want answer to a specific question, please mention that or post that as another question.
Opportunity cost is the cost of next best alternative. It is the foregone benefit that could have been derived by the option that is not chosen.
Comparative advantage occurs when an individual or a country can produce a good at lower opportunity cost than another individual or country.
Trending now
This is a popular solution!
Step by step
Solved in 3 steps
Follow-up Questions
Read through expert solutions to related follow-up questions below.
Follow-up Question
Suppose that each country completely specializes in the production of the good in which it has a
million pairs per week, and the country that produces corn will produce
million bushels per week.
Solution
by Bartleby Expert
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 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax
Principles of Economics 2e
Economics
ISBN:
9781947172364
Author:
Steven A. Greenlaw; David Shapiro
Publisher:
OpenStax