Question

onsider two neighboring island roduce jea countries called Contente and Euphoria. They each have 4 million labor hours available per week that they can use to a combination of both. The following table shows the amount of jeans or corn that can be produced using 1 hour of labor. Country Contente Euphoria eans (Pairs per hour of labor) Corn (Bushels per hour of labor) 16 Initially, suppose Contente uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn, while Euphoria uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Contente produces 8 million pairs of jeans and 48 million bushels of corn, and Euphoria produces 15 million pairs of jeans and 20 million bushels of corn. 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 corn it produces Contente's opportunity cost of producing 1 pair of jeans is of com, and Euphoria's opportunity cost of producing 1 pair of jeans is of corn. Therefore, has a comparative advantage in the production of jeans, and has a comparative advantage in the production of corn. 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 jeans will produce million pairs per week, and the country that produces corn will produce million bushels per week. In the following table, enter each decision on the third row of the table (marked

Answer 1