When the two countries did not specialize, the total production of corn was 23 million bushels per month, and the total production of jeans was 68 million pairs per month. Because of specialization, the total production of corn has increased by million bushels per month, and the total production of jeans has increased by million pairs per month. Because the two countries produce more corn and more jeans under specialization, each country is able to gain from trade. Calculate the gains from tradeāthat 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\"). Without Trade Production Consumption With Trade Corn Felicidad Jeans Corn Arcadia Jeans (Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs) 15 20 8 48 15 20 8 48
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Consider two neighboring island countries called Arcadia and Dolorium. They each have a million labor hours available per month 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 an hour of labor. Corn Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Arcadia Dolorium Initially, suppose Arcadia uses a million hours of labor per month to produce corn and a million hours per month to produce jeans, while Dolorium uses a million hours of labor per month to produce corn and a million hours per month to produce jeans. Consequently, Arcadia produces million bushels of corn and 30 million pairs of jeans, and Dolorium produces 12 million bushels of corn and 16 million pairs of jeans. Assume there are no other countries willing to trade goods. In the absence of trade between these two countries, each country consumes the amount of corn and jeans it produces. Arcadia's opportunity cost of producing a bushel of corn or jeans, and Dolorium's opportunity cost of producing a bushel of corn or jeans. Therefore, Arcadia has a comparative advantage in the production of corn and Dolorium has a comparative 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 corn will produce a million bushels per month, and the country that produces jeans will produce 30 million pairs per month. In the following table, enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces corn trades 13 million bushels of corn to the other country in exchange for 39 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 corn was 17 million bushels per month, and the total production of jeans was 46 million pairs per month. Because of specialization, the total production of corn has increased by 1 million bushels per month, and the total production of jeans has increased by 14 million pairs per month. 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").
Akash M.
3. Gains from trade Consider two neighboring island countries called Bellissima and Felicidad. They each have a million labor hours available per month 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 an hour of labor. Rye Jeans Country (Bushels per hour of labor) Bellissima (Pairs per hour of labor) Felicidad Initially, suppose Bellissima uses a million hours of labor per month to produce rye and a million hours per month to produce jeans, while Felicidad uses 3 million hours of labor per month to produce rye and a million hours per month to produce jeans. Consequently, Bellissima produces a million bushels of rye and 36 million pairs of jeans, and Felicidad produces 12 million bushels of rye and 16 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 a bushel of rye is 1/36 of a pair of jeans, and Felicidad's opportunity cost of producing a bushel of rye is 1/16 of a pair of jeans. Therefore, Bellissima has a comparative advantage in the production of rye, and Felicidad has a comparative 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 a million bushels per month, and the country that produces jeans will produce 36 million pairs per month.
Azat N.
According to data from the U.S. Department of Agriculture's National Agricultural Statistics Service, 124 million acres of land in the United States were used for wheat or corn farming in a recent year. Of those 124 million acres, farmers used 50 million acres to grow 2.158 billion bushels of wheat and 74 million acres to grow 11.807 billion bushels of corn. Suppose that U.S. wheat and corn farming is efficient in production. At that production point, the opportunity cost of producing 1 additional bushel of wheat is 1.7 fewer bushels of corn. However, because farmers have increasing opportunity costs, additional bushels of wheat have an opportunity cost greater than 1.7 bushels of corn. For each of the following production points, decide whether that production point is (i) feasible and efficient in production, (ii) feasible but not efficient in production, (iii) not feasible, or (iv) unclear as to whether or not it is feasible. a. Farmers use 40 million acres of land to produce 1.8 billion bushels of wheat, and they use 60 million acres of land to produce 9 billion bushels of corn. The remaining 24 million acres are left unused. b. From their original production point, farmers transfer 40 million acres of land from corn to wheat production. They now produce 3.158 billion bushels of wheat and 10.107 bushels of corn. c. Farmers reduce their production of wheat to 2 billion bushels and increase their production of corn to 12.044 billion bushels. Along the production possibility frontier, the opportunity cost of going from 11.807 billion bushels of corn to 12.044 billion bushels of corn is 0.666 bushel of wheat per bushel of corn.
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