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Consider two neighboring island countries called Arcadia and Euphoria. 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. Rye Country (Bushels per hour of labor) Arcadia 8 Euphoria 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Arcadia 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, Arcadia produces 8 million bushels of rye and 48 million pairs of jeans, and Euphoria produces 15 million bushels of rye and 20 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. of jeans, and Euphoria's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative Arcadia's opportunity cost of producing 1 bushel of rye is of jeans. Therefore, 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.

Consider two neighboring island countries called Arcadia and Euphoria. 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. Rye Country (Bushels per hour of labor) Arcadia 8 Euphoria 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Arcadia 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, Arcadia produces 8 million bushels of rye and 48 million pairs of jeans, and Euphoria produces 15 million bushels of rye and 20 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. of jeans, and Euphoria's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative Arcadia's opportunity cost of producing 1 bushel of rye is of jeans. Therefore, 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.

Principles of Economics (MindTap Course List)
Principles of Economics (MindTap Course List)
8th Edition
ISBN:9781305585126
Author:N. Gregory Mankiw
Publisher:N. Gregory Mankiw
Chapter18: The Markets For The Factor Of Production
Section: Chapter Questions
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Consider two neighboring island countries called Arcadia and Euphoria. 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 Arcadia Euphoria Rye (Bushels per hour of labor) 8 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Arcadia 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, Arcadia produces 8 million bushels of rye and 48 million pairs of jeans, and Euphoria produces 15 million bushels of rye and 20 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. of jeans, and Euphoria's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative Arcadia's opportunity cost of producing 1 bushel of rye is of jeans. Therefore, 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.
Transcribed Image Text:Consider two neighboring island countries called Arcadia and Euphoria. 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 Arcadia Euphoria Rye (Bushels per hour of labor) 8 5 Jeans (Pairs per hour of labor) 16 20 Initially, suppose Arcadia 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, Arcadia produces 8 million bushels of rye and 48 million pairs of jeans, and Euphoria produces 15 million bushels of rye and 20 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. of jeans, and Euphoria's opportunity cost of producing 1 bushel of rye is has a comparative advantage in the production of rye, and has a comparative Arcadia's opportunity cost of producing 1 bushel of rye is of jeans. Therefore, 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.
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