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Assume the United States has a linear production possibilities frontier and is able to produce (before the trade) either 100 barrels of oil or 25 bushels of corn using 100 worker hours. Also, suppose the United States chooses to produce 60 barrels of oil. If the United States trades 20 barrels of oil for 20bushels of corn, how many bushels of corn will it have at the end of the exchange?

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Darryn D'Souza
Darryn D'SouzaLv10
28 Sep 2019

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Related questions

Assume Brazil has a linear production possibilities frontier and is able to produce (before the trade) either 20 bushels of corn or 15 bushels of wheat using 100 worker hours. Also, suppose Brazil decides to produce 15 bushels of corn. If Brazil trades 10 bushels of corn for 10 bushels of wheat, how many bushels of wheat will the country have at the end of the exchange?

Assume China has a linear production possibilities frontier and is able to produce (before the trade) either 80 batches of apples or 20 batches of pumpkins using 100 worker hours. Also, suppose China decides to produce 40 batches of apples. If China trades 20 batches of apples for 20 batches of pumpkins, how many pumpkins will the country have at the end of the exchange?

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

Country Jeans Corn
(Pairs per hour of labor) (Bushels per hour of labor)
Felicidad 8 32
Contente 12 24

Initially, suppose Contente uses 1 million hours of labor per month to produce jeans and 3 million hours per month to produce corn, while Felicidad uses 3 million hours of labor per month to produce jeans and 1 million hours per month to produce corn. Consequently, Felicidad produces 24 million pairs of jeans and 32 million bushels of corn, and Contente produces 12 million pairs of jeans and 72 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 of jeans and corn it produces.

Felicidad's opportunity cost of producing 1 pair of jeans is______ bushels of corn, and Contente's opportunity cost of producing 1 pair of jeans is______​ bushels of corn. Therefore,______ has a comparative advantage in the production of jeans, and______ has a comparative advantage in the production of corn.

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 jeans will produce______million pairs per month, and the country that produces corn will produce______million bushels 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 jeans trades 26 million pairs of jeans to the other country in exchange for 78 million bushels of corn.

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 million pairs per month, and the total production of corn was 104 million bushels per month. Because of specialization, the total production of jeans has increased by______million pairs per month, and the total production of corn has increased by______million bushels per month.

Because the two countries produce more jeans and more corn 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").

Felicidad

Contente
Jeans Corn Jeans Corn
(Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels)
Without Trade
Production 24 32 12 72
Consumption 24 32 12 72
With Trade
Production
Trade action
Consumption
Gains from Trade
Increase in Consumption

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