Fill the differences in the boxes

Assignment Help Econometrics
Reference no: EM131088180

Gains from trade Consider two neighboring island countries called Bellissima and Euphoria. They each have 4 million labor hours available per month that they can use to produce corn, jeans, or a combination of both. The following table shows the amount of corn or jeans that can be produced using 1 hour of labor.

CountryCornJeans
(Bushels per hour of labor)(Pairs per hour of labor)
Bellissima 8 16
Euphoria 5 20

Initially, suppose Bellissima uses 1 million hours of labor per month to produce corn and 3 million hours per month to produce jeans while Euphoria uses 3 million hours of labor per month to produce corn and 1 million hours per month to produce jeans. Consequently, Bellissima produces 8 million bushels of corn and 48 million pairs of jeans, and Euphoria produces 15 million bushels of corn 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 corn and jeans it produces.Bellissima's opportunity cost of producing 1 bushel of corn is2 pairs of jeans, and Euphoria's opportunity cost of producing 1 bushel of corn is4 pairs of jeans. Therefore,Euphoria has a comparative advantage in the production of corn, andBellissima 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 producemillion bushels per month, and the country that produces jeans will producemillion pairs per month.In the following table, enter each country's production decision on the third row of the table (marked "Production").Suppose the country that produces corn trades 18 million bushels of corn to the other country in exchange for 54 million pairs of jeans.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 corn was 23 million bushels per month, and the total production of jeans was 68 million pairs per month. Because of specialization, the total production of corn has increased bymillion bushels per month, and the total production of jeans has increased bymillion pairs per month.Because the two countries produce more corn and more jeans under specialization, each country is able to gain from trade.Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in consumption").


BellissimaEuphoria
CornJeansCornJeans
(Millions of bushels)(Millions of pairs)(Millions of bushels)(Millions of pairs)
Without trade
Production 8 48 15 20
Consumption 8 48 15 20
With trade
Production



Trade action Imports 18


Consumption



Gains from trade
Increase in consumption


Reference no: EM131088180

Questions Cloud

The five characteristics of a profession : Using each of the five characteristics of a profession, analyze and explain how computing exhibits or fails to exhibit each characteristic. Afterwards, explain why you believe, based on your analysis, computing is a profession or not.
Compare and contrast the fiscal health of the u.s : Compare and contrast the fiscal health of the U.S. with that of at least one other nation over time. Give your estimation of the economic outlook/prospects for each.
Addressing the greatest strength : So what should one do? Check out these sites on addressing the "greatest strength" question:
New brand of headache remedy : (a) 25 year old, health worker who sees the same physician for minor medical needs; (b) the retired individual who calls the state medical society and seeks a second opinion prior to open-heart surgery; (c) the consumer who sees a new brand of hea..
Fill the differences in the boxes : In the following table, enter this difference in the boxes across the last row (marked "Increase in consumption").
Thoughtfully scrutinizing and evaluating claims : Critical thinking is defined as, "The practice of thoughtfully scrutinizing and evaluating claims in order to uncover the truth and form better opinions."
External equity financing : Gardial GreenLights, a manufacturer of energy efficient lighting solutions, has had such success with its new products that it is planning to substantially expand its manufacturing capacity with a $20 million investment in new machinery.
Description of the data collection methods and sources : Select a position at your current or previous place of employment, or any position in a specific organization for which you have basic knowledge (e.g., customer service representative, electrical engineer, legal aide, etc.). Your selected company ..
Profitable investment opportunities-existing debt ratio : The Wei Corporation expects next year's net income to be $20 million. The firm's debt ratio is currently 50%. Wei has $15 million of profitable investment opportunities, and it wishes to maintain its existing debt ratio

Reviews

Write a Review

Econometrics Questions & Answers

  Design a simple econometric research project

Design a simple econometric research project

  Multiplicative decomposition method

Multiplicative decomposition method

  Market for cigarettes

The Australian government administers two programs that affect the market for cigarettes.

  Solve the forecast model

Solve the forecast model

  What are the marginal abatement cost functions

What are the marginal abatement cost functions for each of the two areas? Calculate the loss in the two areas due to over-control (for the rural area) and under-control (for the urban area).

  Write the t statistic for testing the null hypothesis

Explain why this model violates the assumption of no perfect collinearity.  Write the t statistic for testing the null hypothesis

  What is economics system

What is economics system? What are the types of economics system? Briefly explain each type of economics system by giving examples of nations that are close to each type

  Multiple choice questions related to market concentration

Determine when a competitively produced product generates negative externalities in production, the industry will,

  Calculating number of units produced by firm

Assume a company has the following production function: Q = 100 K.5 L1 . Currently, the company hires 1,000 workers and employs 100 units of capital.

  Question about mobile commerce

M-commerce also known as mobile commerce is being lumped in with several strategic internet plans. Explain some of the industries that are likely to use mobile commerce and how it is working for them.

  Calculating the average days past due and average flow time

Auto Data manufactures custom engineering testing machine. The following 5-orders are currently in the design department:

  Mechanism of an english auction and second price auction

Briefly discuss the difference between mechanism of an oral or English auction and a Vickrey or second price auction.

Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd