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Help! Consider two neighboring island countries called Contente and Felicidad. They each have 4 million labor hours available per month that they can use to
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Consider two neighboring island countries called Contente and Felicidad. 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 iabor. Initially, suppose Contente uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce rve, whie felicidad wises 3 million hours of labor per month to produce jeans and 1 million hours per month to produce rye. Consequently. Contente proctuces 12 milition pairs af jeans and 72 million bushels of rye, and Felicidad produces 24 million pairs of jeans and 32 million bushels of rye. Assime 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. Contente's opportunity cost of producing 1 pair of jeans is of rye, and Fellicad's opportunity cost of produeng 1 pair of yeans is of rye. Therefore, has a comparative advantage in the production of jeans, and advantage in the production of rye. Suppose that each country completely specializes in the production of the good in which it has a comparative advantaga, producing only thot good. In this case, the country that produces jeans will produce million busheis per month. million pairs per month, and the country that procuces rye will produce 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 milion pairs of jeans to the other country in exchange for 78 milsion 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 milion pairs per month, and the total production of rye was tod mililee busheis per month. Because of speciaization, the total production of jeans has increased by milition pairs per month, and the totai prodection of rye has increased by mililion bushels per month. Because the two countries produce more jeans and more rye under specializebon, each country is oble to gain from trade- CaVculate the gains from trade-that is, the amount by which each country has increased its consumption of eqch good reiative to the fisst rivi af the table. In the following table, enter this difference in the boxes across the last row (marked lncrease in camsumpson'2: Calculate the gains from trade-that is, the amount by which each country has increased its cansumption of each good relative to the fist row or the table. In the following table, enter this difference in the boxes across the last row (marked "Increuse in consumption Step by Step Solution
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