Suppose there exist two imaginary countries Yosemite and

Last updated: 4/24/2023

Suppose there exist two imaginary countries Yosemite and Everglades Their labor forces are each capable of supplying four million hours per week that can be used to produce shorts almonds or some combination of the two The following table shows the amount of shorts or almonds that can be produced by one hour of labor Country Yosemite Everglades Shorts Almonds Pairs per hour of labor Pounds per hour of labor 8 16 5 20 Suppose that initially Yosemite uses 1 million hours of labor per week to produce shorts and 3 million hours per week to produce almonds while Everglades uses 3 million hours of labor per week to produce shorts and 1 million hours per week to produce almonds As a result Yosemite produces 8 million pairs of shorts and 48 million pounds of almonds and Everglades produces 15 million pairs of shorts and 20 million pounds of almonds Assume there are no other countries willing to engage in trade so in the absence of trade between these two countries each country consumes the amount of shorts and almonds it produces Yosemite s opportunity cost of producing 1 pair of shorts is shorts is of almonds Therefore of almonds and Everglades s opportunity cost of producing 1 pair of has a comparative advantage in the production of shorts and has a comparative advantage in the production of almonds 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 shorts will produce million pairs per week and the country that produces almonds will produce million pounds per week In the following table enter each country s production decision on the third row of the table marked Production Suppose the country that produces shorts trades 18 million pairs of shorts to the other country in exchange for 54 million pounds of almonds In the following table select the amount of each good th