Principles of Economics (12th Edition)
12th Edition
ISBN: 9780134078779
Author: Karl E. Case, Ray C. Fair, Sharon E. Oster
Publisher: PEARSON
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Chapter 7, Problem 2.3P
To determine
Estimate the wage of less skilled worker.
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Suppose that initially Denali uses 1 million hours of labor per week to produce pistachios and 3 million hours per week to produce chinos, while Sequoia uses 3 million hours of labor per week to produce pistachios and 1 million hours per week to produce chinos. As a result, Sequoia produces 24 million pounds of pistachios and 32 million pairs of chinos, and Denali produces 12 million pounds of pistachios and 72 million pairs of chinos. 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 pistachios and chinos it produces.
Sequoia's opportunity cost of producing 1 pound of pistachios is4 pairs of chinos, and Denali's opportunity cost of producing 1 pound of pistachios is2 pairs of chinos. Therefore,Sequoia has a comparative advantage in the production of pistachios, andDenali has a comparative advantage in the production of chinos.
Suppose that each country…
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Principles of Economics (12th Edition)
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