Question: When the two countries did not specialize, the total production of jeans was 23 million pairs per month, and the total production of rye was


When the two countries did not specialize, the total production of jeans was 23 million pairs per month, and the total production of rye was 68 million bushels per month. Because of specialization, the total production of jeans has increased by million pairs per month, and the total production of rye has increased by million bushels per month. Because the two countries produce more jeans and more rye under specialization, each country is able to gain from trade. Calculate the gains from trade-that is, the amount by which each country has increased its consumption of each good relative to the first row of the table. In the following table, enter this difference in the boxes across the last row (marked "Increase in Consumption"). Bellissima Euphoria Jeans Rye Jeans Rye (Millions of pairs) (Millions of bushels) (Millions of pairs) (Millions of bushels) Without Trade Production 48 15 20 Consumption 48 15 20 With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Grade It Now Save & Continue
Step by Step Solution
There are 3 Steps involved in it
Get step-by-step solutions from verified subject matter experts
