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Consider two neighboring island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Dolorium 8 32 Arcadia 12 24 Initially, suppose Arcadia uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Dolorium produces 24 million bushels of corn and 32 million pairs of jeans, and Arcadia produces 12 million bushels of corn and 72 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 corn and jeans it produces. Dolorium's opportunity cost of producing 1 bushel of corn is of jeans, and Arcadia's opportunity cost of producing 1 bushel of corn is has a comparative v of jeans. Therefore, has a comparative advantage in the production of corn, 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 million bushels per week, and the country that produces jeans will produce this case, the country that produces corn will produce

Consider two neighboring island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Dolorium 8 32 Arcadia 12 24 Initially, suppose Arcadia uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Dolorium produces 24 million bushels of corn and 32 million pairs of jeans, and Arcadia produces 12 million bushels of corn and 72 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 corn and jeans it produces. Dolorium's opportunity cost of producing 1 bushel of corn is of jeans, and Arcadia's opportunity cost of producing 1 bushel of corn is has a comparative v of jeans. Therefore, has a comparative advantage in the production of corn, 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 million bushels per week, and the country that produces jeans will produce this case, the country that produces corn will produce

Essentials of Economics (MindTap Course List)
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
Problem 4PA
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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 corn 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 corn 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 corn 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"). Dolorium Arcadia Corn Jeans Corn Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) Without Tra 32 12 72 Production 24 32 12 72 24 Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption
Transcribed Image Text: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 corn 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 corn 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 corn 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"). Dolorium Arcadia Corn Jeans Corn Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) Without Tra 32 12 72 Production 24 32 12 72 24 Consumption With Trade Production Trade action Consumption Gains from Trade Increase in Consumption
3. Gains from trade Consider two neighboring island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Dolorium 8 32 Arcadia 12 24 Initially, suppose Arcadia uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Dolorium produces 24 million bushels of corn and 32 million pairs of jeans, and Arcadia produces 12 million bushels of corn and 72 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 corn and jeans it produces. of jeans, and Arcadia's opportunity cost of producing 1 bushel of corn is v has a comparative Dolorium's opportunity cost of producing 1 bushel of corn is v of jeans. Therefore, has a comparative advantage in the production of corn, 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 million bushels per week, and the country that produces jeans will produce this case, the country that produces corn will produce million pairs per week.
Transcribed Image Text:3. Gains from trade Consider two neighboring island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Dolorium 8 32 Arcadia 12 24 Initially, suppose Arcadia uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Dolorium produces 24 million bushels of corn and 32 million pairs of jeans, and Arcadia produces 12 million bushels of corn and 72 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 corn and jeans it produces. of jeans, and Arcadia's opportunity cost of producing 1 bushel of corn is v has a comparative Dolorium's opportunity cost of producing 1 bushel of corn is v of jeans. Therefore, has a comparative advantage in the production of corn, 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 million bushels per week, and the country that produces jeans will produce this case, the country that produces corn will produce million pairs per week.
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