Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Country Denali Congaree Shorts Almonds (Pairs per hour of labor) (Pounds per hour of labor) 16 20 Suppose that initially Denali uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Congaree uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Denali produces 8 million pairs of shorts and 48 million pounds of almonds, and Congaree produces 15 million pairs of shorts and 20 million pounds of almonds. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of shorts and almonds it produces Denali's opportunity cost of producing 1 pair of shorts is of almonds. Therefore, comparative advantage in the production of almonds. has a of almonds, and Congaree's opportunity cost of producing 1 pair of shorts is has a comparative advantage in the production of shorts, and 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 shorts will produce million pairs per day, and the country that produces almonds will produce million pounds per day.
Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per day that can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be produced by one hour of labor. Country Denali Congaree Shorts Almonds (Pairs per hour of labor) (Pounds per hour of labor) 16 20 Suppose that initially Denali uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Congaree uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Denali produces 8 million pairs of shorts and 48 million pounds of almonds, and Congaree produces 15 million pairs of shorts and 20 million pounds of almonds. Assume there are no other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of shorts and almonds it produces Denali's opportunity cost of producing 1 pair of shorts is of almonds. Therefore, comparative advantage in the production of almonds. has a of almonds, and Congaree's opportunity cost of producing 1 pair of shorts is has a comparative advantage in the production of shorts, and 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 shorts will produce million pairs per day, and the country that produces almonds will produce million pounds per day.
Microeconomics: Principles & Policy
14th Edition
ISBN:9781337794992
Author:William J. Baumol, Alan S. Blinder, John L. Solow
Publisher:William J. Baumol, Alan S. Blinder, John L. Solow
Chapter21: International Trade And Comparative Advantage
Section: Chapter Questions
Problem 2TY
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Transcribed Image Text:Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per day that
can be used to produce shorts, almonds, or some combination of the two. The following table shows the amount of shorts or almonds that can be
produced by one hour of labor.
Country
Denali
Congaree
Shorts
Almonds
(Pairs per hour of labor) (Pounds per hour of labor)
16
20
Suppose that initially Denali uses 1 million hours of labor per day to produce shorts and 3 million hours per day to produce almonds, while Congaree
uses 3 million hours of labor per day to produce shorts and 1 million hours per day to produce almonds. As a result, Denali produces 8 million pairs of
shorts and 48 million pounds of almonds, and Congaree produces 15 million pairs of shorts and 20 million pounds of almonds. Assume there are no
other countries willing to engage in trade, so, in the absence of trade between these two countries, each country consumes the amount of shorts and
almonds it produces.
Denali's opportunity cost of producing 1 pair of shorts is
of almonds. Therefore,
comparative advantage in the production of almonds.
of almonds, and Congaree's opportunity cost of producing 1 pair of shorts is
has a comparative advantage in the production of shorts, and
has a
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 shorts will produce million pairs per day, and the country that produces almonds will produce
million pounds per day.
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