DL| Unit 9: Instructional.. FI I CENGAGE | MINDTAP Homework (Ch 02) 2. Absolute and comparative advantage udy To Consider two neighboring Island countries, Botoga and Euclidla. Each has 24,000 labor hours available per week that it can use to produce wheat, jeans, or a combination of both. The following table shows the amount of labor hours required to produce 1 bushel of wheat or 1 pair of jeans. s Tips Tips Wheat Jeans Country (Labor hours per bushel) (Labor hours per pair) Botoga Euclidia ises: has an absolute advantage in the production of wheat, and has an absolute advantage in the production of jeans. Initially, suppose Botoga uses 18,000 hours of labor per week to produce wheat and 6,000 hours per week to produce jeans, while Euclidia uses 6,000 hours of labor per week to produce wheat and 18,000 hours per week to produce 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 wheat and jeans it produces. Botoga's opportunity cost of producing 1 bushel of wheat is of jeans, and Euclidia's opportunity cost of producing 1 bushel of wheat Is of jeans. Therefore, has a comparative advantage in the production of wheat, and has a comparative advantage in the production of jeans. When neither country specializes, the total production of wheat is bushels per week, and the total production of jeans is pairs per week. Suppose that Botoga 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 Euclidia does not specialize and uses 18,000 hours of labor to produce wheat and 6,000 hours of labor to produce jeans. It will produce bushels of wheat and pairs of jeans. Suppose Botoga and Euclidia agree to trade with each other, exchanging 410 bushels of wheat for 1,230 pairs of jeans. In particular, Botoga will export the goods it produces, and Euclidla will export the goods that Botoga does not produce. With trade, Botoga will wheat and jeans. Euclidia will wheat and jeans. When Botoga specializes and Euclidia still produces the combination of goods using 18,000 hours of labor to produce wheat and 6,000 hours of labor to produce jeans, the total production of wheat bushels per week, and the total production of jeans becomes becomes pairs per week. Grade It Now Save & Continue