Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor 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 Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 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 rye and jeans it produces. Bellissima's opportunity cost of producing 1 bushel of rye is of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative of jeans. Therefore, 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 rye will produce million bushels per week, and the country that produces jeans will produce million pairs 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 rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans. In the foliowing 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 rye was 36 million bushels per week, and the total production of jeans was 104 million bushels per week, and the total million pairs per week. Because of specialization, the total production of rye has increased by million pairs per week. production of jeans has increased by Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade.

Essentials of Economics (MindTap Course List)
8th Edition
ISBN:9781337091992
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter3: Interdependence And The Gains From Trade
Section: Chapter Questions
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Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor 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
Jeans
Country
(Bushels per hour of labor)
(Pairs per hour of labor)
Bellissima
12
24
Dolorium
8
32
Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses
3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels
of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. Assume there are no other
countries willing to trade goods, so, in the absence
trade between these two countries, each country consumes the amount of rye and jeans it
produces.
v of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is
has a comparative
er
Bellissima's opportunity cost of producing 1 bushel of rye is
v of jeans. Therefore,
v has a comparative advantage in the production of rye, and
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 rye will produce
million bushels per week, and the country that produces jeans will produce
million pairs 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 rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans.
In the folowing 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 rye was 36 million bushels per week, and the total production of jeans was 104
million bushels per week, and the total
million pairs per week. Because of specialization, the total production of rye has increased by
million pairs per week.
production of jeans has increased by
Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade.
etv
MacBook Air
DO
888
FB
14
F3
%23
24
6.
7.
8.
21
3
W
R
Transcribed Image Text:Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor 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 Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 8 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence trade between these two countries, each country consumes the amount of rye and jeans it produces. v of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is has a comparative er Bellissima's opportunity cost of producing 1 bushel of rye is v of jeans. Therefore, v has a comparative advantage in the production of rye, and 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 rye will produce million bushels per week, and the country that produces jeans will produce million pairs 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 rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans. In the folowing 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 rye was 36 million bushels per week, and the total production of jeans was 104 million bushels per week, and the total million pairs per week. Because of specialization, the total production of rye has increased by million pairs per week. production of jeans has increased by Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade. etv MacBook Air DO 888 FB 14 F3 %23 24 6. 7. 8. 21 3 W R
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. IL
this case, the country that produces rye will produce
million bushels per week, and the country that produces jeans will produce
million pairs 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 rye trades 26 million bushels of rye to the other country in exchange for 78 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 rye was 36 million bushels per week, and the total production of jeans was 104
million pairs per week. Because of specialization, the total production of rye has increased by
million bushels per week, and the total
production of jeans has increased by
million pairs per week.
Because the two countries produce more rye 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").
Bellissima
Dolorium
Rye
Jeans
Rye
Jeans
(Millions of bushels)
(Millions of pairs) (Millions of bushels)
(Millions of pairs)
Without Trade
12
72
24
32
Production
12
72
24
32
Consumption
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
MacBook Air
44
88
F8
F7
F3
F4
F2
%23
6.
Transcribed Image Text: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. IL this case, the country that produces rye will produce million bushels per week, and the country that produces jeans will produce million pairs 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 rye trades 26 million bushels of rye to the other country in exchange for 78 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 rye was 36 million bushels per week, and the total production of jeans was 104 million pairs per week. Because of specialization, the total production of rye has increased by million bushels per week, and the total production of jeans has increased by million pairs per week. Because the two countries produce more rye 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"). Bellissima Dolorium Rye Jeans Rye Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) Without Trade 12 72 24 32 Production 12 72 24 32 Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption MacBook Air 44 88 F8 F7 F3 F4 F2 %23 6.
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