Question

Homework (Ch 03) 3. Galns from trade Consider two neighboring island countries called Euphoria and Contente. They each have 4 million labor hours available per week 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 1 hour of labor Corn Country Euphoria Contente Jeans (Pairs per hour of labor) 20 16 (Bushels per hour of labor) Initially, suppose Contente uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Euphoria uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Euphoria produces 15 million bushels of corn and 20 million pairs of jeans, and Contente produces 8 million bushels of corn and 48 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 corn and jeans it produces. Euphoria's opportunity cost of producing 1 bushel of corn is of jeans, and Contente's opportunity cost of producing 1 bushel of corn is has a comparative of jeans. Therefore,Y Y has a comparative advantage in the production of corn, and 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 million bushels per week, and the country that produces jeans will produce MacBook Air

Answer 1