Chapter 03 Problem Solving
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 chinos was 36 million pairs per week, and the total production of pistachios was 104
million pounds per week. Because of specialization, the total production of chinos has increased by ____ million pairs per week, and the total
production of pistachios has increased by ____ million pounds per week.
Because the two countries produce more chinos and more pistachios 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").
Congaree Glacier
Chinos Pistachios Chinos Pistachios
(Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds)
Without Trade
Production 24 32 12 72
Consumption 24 32 12 72
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption
