Question

3. Gains from trade Consider twee boring and countries Cated Arcadia and Dolorum. They each have minor hours w h y produce com, Jeans, or a combination of both. The following table shows the amount of com or Jeans that can be produced using 1 hour of abor Country Corn Bushels per hour of labor) (Pairs per hour of labor) Arcadia Dolorum Initially suppose Arcadia usei million hours of labor per week to produce comand o hours per week to produce ans, while Dolorum uses 3 million hours of inbor per week to produce com and 1 milion hours per week to produce ans. Consequently, Arcadia produces million bushels of com and 4 pairs of ans, and Dolorum produces 15 million bushels of com and 20 million pairs of an Assume there are no other countries willing to trade goods, s, in the absence of trade between these two countries, each country consumes the amount of comandant produce bushel of comis of jeans, and Dolorum's opportunity cost of producing 1 bushel of cornis Arcadia's oportunity cost of producing fans. Therefore, advantage in the production of jeans Suppose that each country completely se this case, the country that produce con on pairs per week. e in the production of the good in which it has a comparative advantage, producing only that good. In il produce bushes and the produces jeansi produce In the following tenter each cy 's product o r ado W ER

Answer 1

corn Jeans 16 Arcadia Dolorum S 20 Arcadia's app wst of, corn - 2 pair of Jeans Doloreen opp wort of I com a espain of Jeans Therchon Arcadia has CA in corn 4 Rolorwin has CA in Jeans After specialischen nodna 32 million & Jeans 30 million corn produ= 32 million Yoon in com productroi = 32-23=9 million bushels. Jeans produchor = moduchor = 8068=12 oo million Your in Dolorun Arcada Jeans corn produ consor with had hodn Trade Export 19 Tupon sy por 18 Exporgy 54 29 yours ) from 06 06 03 oC