The table below shows the hourly output per worker in two industries in Chile and Argentina. Use this table to answer the following questions.
Output per hour of work
Hats
Beer
Chile
8
6
Argentina
1
2
Part 2 a. Argentina Chile has an absolute advantage in the production of hats, and Argentina Chile has an absolute advantage in the production of beer.
Part 3 b. Argentina Chile has a comparative advantage in the production of hats, and Argentina Chile has a comparative advantage in the production of beer.
Part 4 c. Suppose that Chile and Argentina currently do not trade with each other. Each has 1,000 hours of labor to use for producing hats and beer, and the countries are currently producing the amounts of each good shown in the table below. Using this information, give a numerical example of how Chile and Argentina can both gain from complete specialization and trade. Assume that after trading begins, one hat can be exchanged for one barrel of beer.
Current production (no trade)
Hats
Beer
Chile
7,200
600
Argentina
600
800
Complete the table below. The table represents the amount of hats and beer after trading for each country (enter your responses as integer values).
Hats
Beer
Chile
enter your response here
600
Argentina
600
enter your response here
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