3. Gains from trade Suppose there exist two imaginary countries, Denali and Congaree. Their labor forces are each capable of supplying four million hours per week that can be used to produce chinos, pistachios, or some combination of the two. The Following table shows the amount of chinos or pistachios that can be produced by one hour of labor. chinos Pistachios Country (Pairs per hour of labor) (Pounds per hour of labor) Denali 8 1 6 Congaree 5 20 Suppose that initially Denali uses 1 million hours of labor per week to produce chinos and 3 million hours per week to produce pistachios, while Congaree uses 3 million hours of labor per week to produce chinos and 1 million hours per week to produce pistachios. As a result, Denali produces 8 million pairs of chinos and 48 million pounds of pistachios, and Congaree produces 15 million pairs of chinos and 20 million pounds of pistachios. Denali's opportunity cost of producing 1 pair of chinos is V of pistachios, and Congaree's opportunity cost of producing 1 pair of chinos is Y of pistachios. Therefore, parative advantage in the production of chines, and V has a comparative advantage in the production of pistachios. 1/2 pound 1/4 pound Suppose that each country completely specializes in the the good in which it has a comparative advantage, producing only that good. In 2 pounds this case, the country that produces chinos will produce n pairs per week, and the country that produces pistachios will produce C] million pounds per week. 4 pounds Denali's opportunity cost of producing 1 pair of chinos is Y of pistachios, and Congaree's opportunity cost of producing 1 pair of chinos is V of pistachios. Therefore, V has a comparative advantage in the production of chinos, and V has a comparative advantage in the production of pistachios. Suppose that each country completely specializes in the production of the good in which it has a comparative advantage, p that good. In - .. - oduce this case, the country that produces chinos will produce |:] million pairs per week, and the country that produces pist C] million pounds per week. Denali's opportunity cost of producing 1 pair of chinos is Y of pistachios, and Congaree's opportunity cost of producing 1 pair of chinos s V of pistachios. Therefore, V has a comparative advantage in the production of chinos, and V has a antage in the production of pistachios. ch country completely specializes in the production of the good in which it has a comparative advantage, producing only that good. II uuntry that produces chinos will produce C] million pairs per week, and the country that produces pistachios will produce pounds per week. in the foiiowing table, enter each country's production decision on the third row of the tabie (marked "Pr Denali's opportunity cost of producing 1 pair of chinos is V of pistachios, and Congaree's opportunity cost of producing 1 pair of ct is V of pistachios. Therefore, V has a comparative advantage in the production of chinos, and V has a comparative advantage in the production of Congaree Suppose that each country completely speci uroduction oi the good in which it has a comparative advantage, producing only that go: this case, the country that produces chinos . :l million pounds per week. million pairs per week, and the country that produces pistachios will produce In the following table, enter each country's production decision on the third row of the tabie (marked "Production\"). Suppose the country that produces chinos trades 18 million pairs of chinos to the other country in exchange for 54 million pounds of pistachio In the foiiowing table, select the amount of each good that each country exports and imports in the boxes across the row marked \"Trade Actic enter each country's final consumption of each good on the iine marked \"Consumption. \" When the two countries did not specialize, the total production of chinos was 23 million pairs per week, and the total production of pistachios million pounds per week. Because of specialization, the total production of chinos has increased by C] million pairs per week, and the to production of pistachios has increased by |:] million pounds per week. Calculate the gains from tradethat is, the amount by which each country has increased its consumption of each good relative to the first ro table. In the following table, enter this difference in the boxes across the last row (marked \"Increase in Consumption\"). Denali Congaree Chinos Pistachios Chinos Pistachios (Millions of pairs ) (Millions of pounds) (Millions of pairs) (Millions of pounds ) Without Trade Production 48 15 20 Consumption 48 15 20 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption m|mw DD|D DD|D m|m Calculate the gains from tradethat is, the amount by which each country has increased its consumption of each good relative to th: table. In the following table, enter this difference in the boxes across the last row (marked \"Increase in Consumption\"). Denali Congaree Chinos Pistachios Chinos Pistachios (Millions of pairs) (Millions of pounds ) (Millions of pairs) (Millions of pounds ) Without Trade Production 8 48 15 20 Consumption 8 48 15 20 With Trade Production Trade action Consumption Exports 18 Increase in Consumption Imports 18 Gains from Trade Denali Congaree Chinos Pistachios Chinos Pistachios (Millions of pairs) (Millions of pounds) ( Millions of pairs) (Millions of pounds) Without Trade Production 8 48 15 20 Consumption 8 48 15 20 With Trade Production Trade action Consumption Exports 54 Gains from Trade Increase in Consumption Imports 54Denali Congaree Chinos Pistachios Chinos Pistachios (Millions of pairs) (Millions of pounds) (Millions of pairs) (Millions of pounds) Without Trade Production 48 15 20 Consumption 48 15 20 With Trade Production Trade action Consumption Exports 18 Imports 18 Gains from Trade m|mw Increase in Consumption Calculate the gains from tradethat is, the amount by which each country has increased its consumption of each good reiative to the tabIe. In the foiiowing table, enter this difference in the boxes across the last row (marked \"Increase in Consumption\"). Denali Congaree Chinos Pistachios Chinos Pistachios (Millions of pairs) (Millions of pounds) (Millions of pairs ) (Millions of pounds ) Without Trade Production 48 15 20 Consumption 48 15 20 With Trade Production C] Trade action V V T V Exports 54 Imports 54 Consumption Gains from Trade m|mw Increase in Consumption