Please explain this problem!
Consider two neighboring island countries called Dolorium and Contente. They each have 4 million labor hours available per week that they can use to produce jeans, corn, or a combination of both. The following table shows the amount ofjeans or corn that can be produced using 1 hour of labor. Jeans Corn Country (Pairs per hour of iabor) (Busheis per hour of labor) Doloriu m 4 16 Contente 5 12 Initially, suppose Contente uses 1 million hours of labor per week to produce jeans and 3 million hours per week to produce corn. while Dolorium uses 3 million hours of labor per week to produce jeans and 1 million hours per week to produce corn. Consequently, Dolorium produces 12 million pairs of jeans and 1-5 million bushels of corn, and Contente produces (a million pairs ofjeans and 36 million 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 ofjeans and com it produces. Dolorium's opportunity cost of producing 1 pair of jeans is V of com, and Contente's opportunity cost of producing 1 pair of jeans is V of corn. Therefore, V has a comparative advantage in the production ofjeans, and V has a comparative advantage in the production of corn. Suppose that each country completely specializes in the producon of the good in which it has a comparative advantage, producing only that good. In this case, the country that produces jeans will produce E million pairs per week. and the country that produces corn will produces million bushels per week. in the foilowing tahie, enter each country's production decision on the third row of the tahie (marked "Production '7. Suppose the country that produces jeans trades 14 million pairs ofjeans to the other country in exchange for 42 million bushels of corn. In the foilowing tahie, enter each country's production decision on the third row of the tahie ( marked "Production? Suppose the country that produces jeans trades 14 million pairs ofjeans to the other country in exchange for 42 million bushels of corn. In the foilowing tahie, select the amount of each good that each country exports and imports in the boxes across the row marikeor "Trade Action,'and enter each country's finai consumption of each good on the fine marked "Consumption. ' when the two countries did not specialize, the total production ofjeans was 18 million pairs per week, and the total production of corn was 52 million bushels per week. Because of specialization, the total producb'on ofjeans has increased bv|:| million pairs per week, and the total production of corn has increased by \\:| million bushels per week. Because the two countries produce more jeans and more com under specialization, each country is able to gain from trade. Caicuiate the gains from tradethat is, the amount by which each country has increased its consumption of each good reiative to the rst row of the tabie. In the foiiowing tabie, enter this difference in the boxes across the iast row ( marked "Increase in Consumption"). Doloriu m Contente Jeans Corn Jeans Corn (Mifiions of pairs) (Miih'ons of bushels) {Millions of pairs) (Miil'i'ons of bushels) Without Trade Producljon 12 16 36 Consumption 12 16 36 with Trade Production E Trade action v E Consumption E E E Gains from Trade Increase in Consumption \\:|
