Question

abed Assigment Read Chapter 3 | Back to Assignment Due Wednesday 01.23.19 at 1245 A Attempts: Keep the Highest: 14 3. Gains from trade two neighboring island countries called Felicidad and Arcada. They each have 4 milion labor hours available per month that they can use to produce jeans, rye, or a combination of both. The following table shows the amount of jeans or rye that can be pr oduced using 1 hour of labor Jeans Rye (Pairs per hour of labor) Bushels per hour of labor) Country Felicidad Arcadia 20 16 Initially, suppose Arcadia uses 1 milion hours of labor per month to produce jeans and 3 million hours per month to produce rye, while felicxdad uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, F jeans and 20 milion bushels of rye, and Arcadia produces 8 milion pairs of jeans and 48 milion bushels of rye. 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 jeans and rye it produces Felioidad's opportunity cost of producing 1 pair of jeans is of rye, and Arcadia's opportunity cost of producing 1 pair of jeans is of rye. Thgrefore,has a comparative advantage in the production of jeans, and has a comparative advantage in the production of ry Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, producing only that gorsd. Im this case, the country that produces jeans will producemillion pairs per month, and the country that produces rye will produce million bushels per month

Answer 1