Question

Consider two neighboring island countries called Contente and Euphoria. They each have 4 million labor hours available per month 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 (Bushels per hour of labor) Jeans (Pairs per hour of labor) Country Contente Euphoria 20 Initially, suppose Contente uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Euphoria uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Contente produces 8 million bushels of corn and 48 million pairs of jeans, and Euphoria produces 15 million bushels of corn and 20 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.
Unsure if the options selected are correct or not.

Answer 1

Blanks-

1) 16/8 = 2 pair of jeans

2) 20/5 =4 pair of jeans

3) Contente

4) Euphoria

5) 8*4 =32

6) 20*4 =80

7) 32-23 = 9

8) 80-68 =12

	Contente		Euphoria
	Corn	Jeans	Corn	Jeans
Without Trade
Production	8	48	15	20
Consumption	8	48	15	20
With Trade
Production	32	0	0	80
Trade action	Export 18	Import 54	Import 18	Export 54
Consumption	14	54	18	26
Gains from Trade
Increase in Consumption	6	6	3	6