Suppose there exist two imaginary countries, Everglades and Yosemite. Their labor forces are each capable of supplying four million hours per week that can be used to produce pistachios, chinos, or some combination of the two. The following table shows the amount of pistachios or chinos that can be produced by one hour of labor.
Production per hour of labor
Country
Pistachios (Pounds per hour of labor)
Chinos (Pairs per hour of labor)
Everglades
4
16
Yosemite
6
12
Suppose that initially Yoremite uses 1 million hours of labor per week to produce pistachios and 3 million hours per week to produce chinos, while Everglades uses 3 million hours of labor per week to produce pistachios and 1 million hours per week to produce chinos. As a result, Everglades produces 12 million pounds of pistachios and 16 million pairs of chinos, and Yosemite produces 6 million pounds of pistachios and 36 million pairs of chinos. 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 pistachios and chinos it produces.
Everglades’s opportunity cost of producing 1 pound of pistachios is ◻ of chinos, and Yosemite’s opportunity cost of producing 1 pound of pistachios is ◻ of chinos. Therefore, ◻ has a comparative advantage in the production of pistachios, andq, has a comparative advantage in the production of chinos.
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 pistachios will produce ◻ million pounds per week, and the country that produces chinos will produce◻ million pairs per week.
In the following table, enter each country’s production decision on the third row of the table (marked
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