Consider two neighboring island countries, Botoga and Euclidia. Each has 24,000 labor hours available per week that it c

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Consider Two Neighboring Island Countries Botoga And Euclidia Each Has 24 000 Labor Hours Available Per Week That It C 1 (28.7 KiB) Viewed 11 times

Consider Two Neighboring Island Countries Botoga And Euclidia Each Has 24 000 Labor Hours Available Per Week That It C 2 (37.07 KiB) Viewed 11 times

Consider two neighboring island countries, Botoga and Euclidia. Each has 24,000 labor hours available per week that it can use to produce jeans, wheat, or a combination of both. The following table shows the amount of labor hours required to produce 1 pair of jeans or 1 bushel of wheat. Jeans Wheat Country (Labor hours per pair) (Labor hours per bushel) Botoga 48 Euclidia 20 of wheat 12 10 has an absolute advantage in the production of Jeans, and has an absolute advantage in the production Initially, suppose Botoga uses 18.000 hours of labor per week to produce Jeans and 6,000 hours per week to produce wheat, while Eudidia uses 6.000 hours of labor per week to produce Jeans and 18,000 hours per week to produce wheat. 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 wheat it produces.

Botoga's opportunity cost of producing 1 pair of jeans is of wheat. Therefore, advantage in the production of wheat. When neither country specializes, the total production of jeans is bushels per week. of wheat, and Euclidia's opportunity cost of producing 1 pair of jeans is has a comparative has a comparative advantage in the production of Jeans, and With trade, Botoga will Suppose that Botoga completely specializes in the production of the good in which it has a comparative advantage, producing only that good. It will produce Suppose also that Euclidia does not specialize and uses 18.000 hours of labor to produce Jeans and 6.000 hours of labor to produce wheat. It will produce pairs of Jeans and bushels of wheat. jeans and Suppose Botopa and Euclidia agree to trade with each other, exchanging 410 pairs of jeans for 1.230 bushels of wheat. In particular, Botoga will export the goods it produces, and Euclidia will export the goods that Botoga does not produce. pairs per week, and the total production of wheat is i wheat. Euclidia will Jeans and wheat. When Botoga specializes and Euclidis still produces the combination of goods using 18.000 hours of labor to produce Jeans and 5,000 hours of labor to produce wheat, the total production of jeans becomes pairs per week, and the total production of wheat becomes bushels per week