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Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of con or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12

Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of con or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12

Principles of Economics 2e
Principles of Economics 2e
2nd Edition
ISBN:9781947172364
Author:Steven A. Greenlaw; David Shapiro
Publisher:Steven A. Greenlaw; David Shapiro
Chapter33: International Trade
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When neither country specializes, the total production of corn is bushels per week, and the total production of jeans is pairs per week. Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce corn and 18,000 hours of labor to produce jeans. It will produce bushels of corn and pairs of jeans.
Transcribed Image Text:When neither country specializes, the total production of corn is bushels per week, and the total production of jeans is pairs per week. Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce corn and 18,000 hours of labor to produce jeans. It will produce bushels of corn and pairs of jeans.
Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of com or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses 18,000 hours of labor per week to produce corn and 54,000 hours per week to produce 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. Charisma's opportunity cost of producing 1 bushel of corn is of jeans, and Fiatstan's opportunity cost of producing 1 bushel corn is of jeans. Therefore, has a comparative advantage in the production of corn, and has a comparative advantage in the production of jeans. When neither country specializes, the total production of corn is bushels per week, and the total production of jeans is pairs per week. Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It wil produce Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce corn and 18,000 hours of labor to will produce | bushels of corn and pairs of jeans. bushels of corn Suppose Charisma and pairs of jeans fade with each other, exchanging 1,100 bushels of corn for 3,300 pairs of jeans. In particular, Charisma will export the goods it prodbees, aaacod will export the goods that Charisma does not produce.
Transcribed Image Text:Consider two neighboring island countries, Charisma and Fiatstan. Each has 72,000 labor hours available per week that it can use to produce corn, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of com or 1 pair of jeans. Corn Jeans Country (Labor hours per bushel) (Labor hours per pair) Charisma 80 16 Fiatstan 24 12 has an absolute advantage in the production of corn, and has an absolute advantage in the production of jeans. Initially, suppose Charisma uses 54,000 hours of labor per week to produce corn and 18,000 hours per week to produce jeans, while Fiatstan uses 18,000 hours of labor per week to produce corn and 54,000 hours per week to produce 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. Charisma's opportunity cost of producing 1 bushel of corn is of jeans, and Fiatstan's opportunity cost of producing 1 bushel corn is of jeans. Therefore, has a comparative advantage in the production of corn, and has a comparative advantage in the production of jeans. When neither country specializes, the total production of corn is bushels per week, and the total production of jeans is pairs per week. Suppose that Charisma completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It wil produce Suppose also that Fiatstan does not specialize and uses 54,000 hours of labor to produce corn and 18,000 hours of labor to will produce | bushels of corn and pairs of jeans. bushels of corn Suppose Charisma and pairs of jeans fade with each other, exchanging 1,100 bushels of corn for 3,300 pairs of jeans. In particular, Charisma will export the goods it prodbees, aaacod will export the goods that Charisma does not produce.
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