Principles of Micro.. sect x y Mrdtap . Cengage Lear × . https://ng.cengage.c ml

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Principles of Micro.. sect x y Mrdtap . Cengage Lear × . https://ng.cengage.c ml?deploymentld-567366324276124424485784088elSBN-978133709657 MINDTAP Homework (Ch 03) Attempts: Average: 4 3. Gains from trade Consider two neighborning island countries called Dolorium and Arcadia. They each have 4 million labor hours available per week that they can use produce jeans, rye, or a combination of both. The folloning table shows the amount of jeans or rye that can be produced using 1 hour of labor Jeans (Pairs per hour of labor) Rye (Bushels per hour of labor) 20 16 Country Arcadia Intialy, suppose Accada uses 1 máion hours of labor per week to produet eans and 3 milion hours per week to produce rye, while Dolorium uses mition hours of labor per week to produce jeans and 1 milion hours per week to produce rye. Consequently, Dolorium produces 15 million pairs of jeans and 20 milion bushels of rye, and Arcadia produces 8 miltion pairs of jeans and 48 million bushels of rye. Assume there are no other countries wiling to trade goods, so, in the absence of trade between these two countries, each country consumes the amount of Dolorium's opportunity cost of producing 1 pair of jeans s odvantage in the production of rye Suppose that each country completely specializes in the production of the good in which it has a -of rye. Therefore, has a comparative advantage in the production of jeans, and this case, the country that produces jeans will produce i comparative advantage, producing only that good. In milion pairs per week, and the country that produces rye will prod milion bushels per week In the following table, enter each country's production decision on on the thed row of the table (marked "Production") O Type here to search

Explanation / Answer

Dolorium:

5 pair of Jeans = 20 bushels of Rye

1 pair of Jeans = 20/5 = 4 bushels of Rye

Opportunity cost of producing 1 pair of Jeans is 4 bushels Rye.

Arcadia:

8 pair of jeans = 16 bushels of Rye

1 pair of jeans = 2 bushels of Rye

Opportunity cost of producing 1 pair of jeans is 2 bushel of Rye.

A country has a comparative advantage in producing that good if the opportunity cost of producing that good is lower in that country as compared to another country.

Opportunity cost of producing 1 pair of jeans is lower in Arcadia so, Arcadia has a comparative advantage in Jeans and Dolorium has a comparative advantage in Rye.

When Arcadia uses 4 million hours of labor to produce Jeans then it is able to produce 4 million X 8 = 32 million pairs of jeans

When Dolorium uses 4 million hours of labor to produce Rye then it is able to produce 4 million X 20 = 80 million bushels of Rye

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