Question

3. Gains from trade Consider two neighboring island countries called Bellissima and Felicidad. 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 Bellissima Felicidad Initially, suppose Bellissima uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans, while Felicidad uses 3 million hours of labor per month to produce com and 1 million hours per month to produce jeans. Consequently, Bellissima produces 5 million bushels of corn and 30 million pairs of jeans, and Felicidad produces 12 million bushels of corn and 16 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. Bellissima's opportunity cost of producing 1 bushel of corn is of Jeans, and Felicidad's opportunity cost of producing 1 bushel of com

Answer 1

Blanks - To - 2 pairs 16 4 baiss, Bellissime, Felicidad 5x4=20 20-17:3 ; 1684 = 64 , 64-46 = 18 With trade Production Trade Action Consumption Gains Increase in consulph Bellissima Felicidad Com Jeans Com Jeans 2000 64 Export 13 Insport 39 Inpost 13 Export 39 20-137 39 64-39= 25 7-5=2 39-30=9 1-12 1 25-16 = 9.