Answer to Question #28432 in Economics of Enterprise for sonia

Question

Anonymous
Consider two neighboring island countries called Felicidad andBellissima. They each have 4 million labor hours available per week that they can use to produce corn, jeans, or a combination of both. The table below shows the amount of corn or jeans that can be producedusuing one hour of labor.

Corn (Bushels per hour oflabor) Jeans (Pairs per hour of labor) Bellissima 6 12

Euphoria 4 16



Initially, suppose Bellissima uses 1 million hours of labor per week to produce corn and 3 million hours per week to produce jeans, while Euphoria uses 3 million hours of labor per week to produce corn and 1 million hours per week to produce jeans. Consequently, Bellissima produces 36 million pairs of jeans and 6 million bushels of corn, and Euphoria produces 16 million pairs of jeans and 12 million bushels of corn. Assume there are no countries willing to trade goods, so in the absence of trade between these two countries, each country consumes the amount of corn and jeans it produces.

Bellissima’s opportunity cost of producing one bushel of corn is(Answer?) of jeans, and Euphoria's opportunity cost of producing one bushel of corn is (Answer?) . Therefore,(Answer?) has a comparative advantage in the production of corn and (Answer?) has a comparative 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 corn will produce(Answer) bushels per week, and the country that produces jeans will produce (Answer) pairs per week.