🏷️ LIMITED TIME OFFER: GET 20% OFF GRADE+ YEARLY SUBSCRIPTION →
Log in
Economics
2
answers
0
watching
191
views

The following table shows the output produced by one unit of labour in each country:

 

Wine

Clothing

Portugal

1/80 bl per hr

1/90 yd per hr

England

1/120 bl per hr

1/100 yd per hr
  1. Which country has a comparative advantage in wine? In clothing? Why?
  1. Suppose that Portugal has 18000 labour hours available and England has 10000 labour hours available. Further assume that, in autarky (closed to the rest of the world), Portugal uses 11000 hours to produce wine, and the rest to produce clothing, while England uses 8000 hours to produce wine. What are the outputs without specialization and trade (number of units)?
 

Wine

Clothing

Portugal

bl

yd

England

bl

yd

Total

bl

yd
  1. Suppose that the nations now alter their production patterns and engage in complete specialization in the goods in which they have a comparative advantage (the nations use all their hours for the production of one good). What are the outputs? How much is gained from specialization?
 

Wine

Clothing

Portugal

bl

yd

England

bl

yd

Gains

    

Watch
2
answers
0
watching
191
views

For unlimited access to Homework Help, a Homework+ subscription is required.

Unlock all answers

Get 1 free homework help answer.
Already have an account? Log in
Share
Mahe Alam
Mahe AlamLv10
28 Sep 2019
Already have an account? Log in
Share

Related textbook solutions

Principles of Economics
2nd Edition, 2017
Openstax
ISBN: 9781947172364
Principles of Macroeconomics
2 Edition,
Openstax
ISBN: 9781947172388
Principles of Microeconomics
2 Edition,
Openstax
ISBN: 9781947172340

Related questions

Consider the following production data for England and Portugal.

England

Portugal

Labor force

25

200

Number of bottles of wine

per worker

40

50

Number of wheels of cheese

per worker

4

1

(a) Which country has an absolute advantage in the production of each good? Which country

has a comparative advantage in the production of each good?

(b) Suppose prices/wages are in terms of wine. Assuming each country spends 50% income on cheese and 50% on wine, with no trade, what is the wage and price of cheese in

each country? What is the total production of wine and cheese in each country?

(c) Suppose each country specializes in their comparative advantage good. After trade, what is the total global production of each good?

3. Gains from trade

Consider two neighboring island countries called Felicidad and Arcadia. They each have 4 million labor hours available per month that they can use to produce jeans, rye, or a combination of both. The following table shows the amount of jeans or rye that can be produced using 1 hour of labor.

Country Jeans Rye
(Pairs per hour of labor) (Bushels per hour of labor)
Felicidad 8 32
Arcadia 12 24

Initially, suppose Arcadia uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Felicidad uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Felicidad produces 24 million pairs of jeans and 32 million bushels of rye, and Arcadia produces 12 million pairs of jeans and 72 million bushels of rye. 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 rye it produces.

Felicidad's opportunity cost of producing 1 pair of jeans is _____ of rye, and Arcadia's opportunity cost of producing 1 pair of jeans is _____ of rye. Therefore, _____ has a comparative advantage in the production of jeans, and ____ has a comparative advantage in the production of rye.

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 ______ millions pairs per month, and the country that produces rye will produce ______ millions bushels per month.

In the following table, enter each country's production decision on the third row of the table (marked "Production").

Suppose the country that produces jeans trades 26 million pairs of jeans to the other country in exchange for 78 million bushels of rye.

In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action," and enter each country's final consumption of each good on the line marked "Consumption."

When the two countries did not specialize, the total production of jeans was 36 million pairs per month, and the total production of rye was 104 million bushels per month. Because of specialization, the total production of jeans has increased by ____ million pairs per month, and the total production of rye has increased by _____ million bushels per month.

Because the two countries produce more jeans and more rye under specialization, each country is able to gain from trade.

Calculate the gains from trade—that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").

Felicidad

Arcadia
Jeans Rye Jeans Rye
(Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels)
Without Trade
Production 24 32 12 72
Consumption 24 32 12 72
With Trade ? ? ? ?
Production ? ? ? ?
Trade action ? ? ? ?
Consumption ? ? ? ?
Gains from Trade ? ? ? ?
Increase in Consumption ? ? ? ?

3. Gains 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 rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor.

Country Rye Jeans
(Bushels per hour of labor) (Pairs per hour of labor)
Euphoria 8 32
Contente 12 24

Initially, suppose Contente uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Euphoria uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Euphoria produces 24 million bushels of rye and 32 million pairs of jeans, and Contente produces 12 million bushels of rye and 72 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 rye and jeans it produces.

Euphoria's opportunity cost of producing 1 bushel of rye is（ ） of jeans, and Contente's opportunity cost of producing 1 bushel of rye is（ ） of jeans. Therefore, （ ）has a comparative advantage in the production of rye, and（ ） has a comparative 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 rye will produce （ ）million bushels per week, and the country that produces jeans will produce （ ） million pairs per week.

In the following table, enter each country's prod uction decision on the third row of the table (marked "Production").

Suppose the country that produces rye trades 26 million bushels of rye to the other country in exchange for 78 million pairs of jeans.

In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action," and enter each country's final consumption of each good on the line marked "Consumption."

When the two countries did not specialize, the total production of rye was 36 million bushels per week, and the total production of jeans was 104 million pairs per week. Because of specialization, the total production of rye has increased by（ ）million bushels per week, and the total production of jeans has increased by （ ）million pairs per week.

Because the two countries produce more rye and more jeans under specialization, each country is able to gain from trade.

Calculate the gains from trade—that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption").

Euphoria

Contente
Rye Jeans Rye Jeans
(Millions of bushels) (Millions of pairs) (Millions of bushels) (Millions of pairs)
Without Trade
Production 24 32 12 72
Consumption 24 32 12 72
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption

Weekly leaderboard

Home
Homework Help 3,900,000
Economics 400,000
Start filling in the gaps now
Log in