3. Gains from trade Consider two neighboring island countries called Bellissima

Question

3. Gains from trade Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week 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 1 hour of labor. Rye (Bushels per hour of labor) Country Bellissima Doloriunm Jeans (Pairs per hour of labor) 12 16 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 6 million bushels of rye and 36 million pairs of jeans, and Dolorium 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. of jeans, and Dolorium's opportunity cost of producing 1 bushel of rye is has a comparative Bellissima's opportunity t of producing 1 bushel of rye is . of jeans. Therefore, -has a comparative advantage in the production of rye, and advantage in the production of jeans. in the production of the good in which it has a comparative advantage, producing only that good. In Suppose that each country completely specializes this case, the country that produces rye will produce million bushels per week, and the country that produces jeans will produce million pairs per week enter each country's production decision on the third row of the table (marked "Production"). Suppose the country that produces rye trades 14 million bushels of rye to the other country in exchange for 42 million pairs of jeans. country exports and imports in the boxes across the row marked "Trade Action," and In the following table, select the amount of each good that each enter each country's final consumption of each good on the line marked "Consumption." t

Explanation / Answer

Can answer only four questions according to chegg policy. Please send other parts as separate question

Is 12/6=2 pairs of jeans. Of Dolorium is 16/4=4 pairs of jeans.

Therefore Bellissema has comparative advantage in Rye

Dolorium has comparative advantage in jeans

Related Questions

Navigate

• Browse (All)
• Browse 3
• Subjects

---

---

Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.