Consider two neighboring island countries, Contente and Euphoria. Each has 72,00
ID: 1102234 • Letter: C
Question
Consider two neighboring island countries, Contente and Euphoria. Each has 72,000 labor hours available per week that it can use to produce jeans, corn, or a combination of both. The following table shows the amount of labor hours required to produce one pair of jeans or one bushel of corn. Initially, suppose Contente uses 18,000 hours of labor per week to produce jeans and 54,000 hours per week to produce corn, while Euphoria uses 54,000 hours of labor per week to produce jeans and 18,000 hours per week to produce corn. Consequently, Contente produces 500 pairs of jeans and 4,500 bushels of corn, and Euphoria produces 1,800 pairs of jeans and 3,000 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 one pair of jeans is of corn, and Euphoria's opportunity cost of producing one 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 Contente completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce . Suppose also that Euphoria does not specialize and uses 18,000 hours of labor to produce jeans and 54,000 hours of labor to produce corn. It will produce pairs of jeans and bushels of corn. Suppose Contente and Euphoria agree to trade with each other, exchanging 1,300 pairs of jeans for 5,200 bushels of corn. In particular, Contente will export the goods it produces and Euphoria will export the goods that Contente does not produce. With trade, Contente will jeans and corn. Euphoria will jeans and corn. When neither country specializes, the total production of jeans is pairs per week, and the total production of corn is bushels per week. When Contente specializes and Euphoria still produces the combination of goods using 18,000 hours of labor to Produce jeans and 54,000 hours of labor to produce corn, the total production of jeans becomes pairs per week, and the total production of corn became bushels per week .Explanation / Answer
1 - 9 bushels of corn
2 - 1.66 bushels of corn
3 - Euphoria
4 - Contente
5 - 6000 bushels of corn
6 - 600 pairs of jeans
7 - 9000 bushels of corn
8 -
9 -
10 -
11 -
12 - 2300 pairs of jeans
13 - 7500 bushels of corn
14 - 600 pairs of jeans
15 - 9000 bushels of corn