Consider two neighboring island countries called Dolorium and Bellissima. They e

Question

Consider two neighboring island countries called Dolorium and Bellissima. 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)

Initially, suppose Bellissima uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Dolorium uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Dolorium produces 12 million pairs of jeans and 16 million bushels of rye, and Bellissima produces 6 million pairs of jeans and 36 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.

1/2 bushel

1/4 bushel

2 bushels

4 bushels

1/2 bushel

1/4 bushel

2 bushels

4 bushels

Bellissima

Dolorium

Dolorium

Bellissima

Points:

Close Explanation

Explanation:

Points:

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

Close Explanation

Explanation:

Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 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."

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Explanation:

Points:

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").

Close Explanation

Explanation:

Dolorium

Bellissima

Jeans

Rye

Jeans

Rye

(Millions of pairs)

(Millions of bushels)

(Millions of pairs)

(Millions of bushels)

Exports 14

Imports 14

Exports 42

Imports 42

Exports 14

Imports 14

Exports 42

Imports 42

Consider two neighboring island countries called Dolorium and Bellissima. 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)

Dolorium 4 16 Bellissima 6 12

Initially, suppose Bellissima uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rye, while Dolorium uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently, Dolorium produces 12 million pairs of jeans and 16 million bushels of rye, and Bellissima produces 6 million pairs of jeans and 36 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.

Dolorium's opportunity cost of producing 1 pair of jeans is selector 1 {C}

1/2 bushel

1/4 bushel

2 bushels

4 bushels

of rye, and Bellissima's opportunity cost of producing 1 pair of jeans is selector 2   

1/2 bushel

1/4 bushel

2 bushels

4 bushels

of rye. Therefore, selector 3   

Bellissima

Dolorium

has a comparative advantage in the production of jeans, and selector 4   

Dolorium

Bellissima

has a comparative advantage in the production of rye.

Points:

Close Explanation

Explanation:

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 month, and the country that produces rye will produce million bushels per month.

Points:

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

Close Explanation

Explanation:

Suppose the country that produces jeans trades 14 million pairs of jeans to the other country in exchange for 42 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."

Close Explanation

Explanation:

When the two countries did not specialize, the total production of jeans was 18 million pairs per month, and the total production of rye was 52 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.

Points:

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").

Close Explanation

Explanation:

Dolorium

Bellissima

Jeans

Rye

Jeans

Rye

(Millions of pairs)

(Millions of bushels)

(Millions of pairs)

(Millions of bushels)

Without Trade Production 12 16 6 36 Consumption 12 16 6 36 With Trade Production Trade action selector 1   

Exports 14

Imports 14

selector 2   

Exports 42

Imports 42

selector 3   

Exports 14

Imports 14

selector 4   

Exports 42

Imports 42

Consumption Gains from Trade Increase in Consumption

Explanation / Answer

ANSWER:

According to chegg q and a policy only 4 parts to be answered at a time and rest of the parts or questions are to be asked separately.

1) dolorium opportunity cost of producing 1 jeans is 16 / 4 rye = 4 bushels of rye

2) bellissima opportunity cost of producing 1 jeans is 12 / 6 rye = 2 bushels of rye

3) bellissima has a comparitive advantage in production of jeans as opportunity cost of producing 1 jeans is lower for bellissima.

4) dolorium has a comparitive advantage in production of rye as opportunity cost of producing 1 jeans is higher then that of bellissima.

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