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Comparative Advantage In The Production Of Almonds Discussion Paper

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Suppose there exist two imaginary countries, Glacier and Everglades. Their labor forces are each capable of supplying four million hours per day that can be used to produce almonds, shorts, or some combination of the two. The following table shows the amount of almonds or shorts that can be produced by one hour of labor. Suppose that initially Glacier uses 1 million hours of labor per day to produce almonds and 3 million hours per day to produce shorts, while Everglades uses 3 million hours of labor per day to produce almonds and 1 million hours per day to produce shorts. As a result, Glacier produces 12 million pounds of almonds and 72 million pairs of shorts, and Everglades produces 24 million pounds of almonds and 32 million pairs of shorts. 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 almonds and shorts it produces Comparative Advantage In The Production Of Almonds Discussion Paper.

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Glacier's opportunity cost of producing 1 pound of almonds is of shorts, and Everglades's opportunity cost of producing 1 pound of almonds is of shorts. Therefore, has a comparative advantage in the production of almonds, and has a comparative advantage in the production of shorts. 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 almonds will produce million pounds per day, and the country that produces shorts will produce million pairs per day. Suppose the country that produces almonds trades 26 million pounds of almonds to the other country in exchange for 78 million pairs of shorts. In the following table, select the amount of each good that each country exports and imports in the boxes across the row marked "Trade Action, " and enter each country's final consumption of each good on the line marked "Consumption." When the two countries did not specialize, the total production of almonds was 36 million pounds per day, and the totion of shorts million pairs per day. Because of specialization, the total production of almonds has increased by production of shorts has increased by million pairs per day. Because the two countries produce more almonds and more shorts 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"). Glacier Everglades Almonds Shorts Almonds  Shorts ​ (Millions of pounds) (Millions of pairs) (Millions of pounds) (Millions of pairs) Without Trade  Production  Consumption ​1212​7272​2424​3232​ With Trade Production Trade action Consumption Gains from Trade Increase in Consumption Comparative Advantage In The Production Of Almonds Discussion Paper

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Comparative Advantage In The Production Of Almonds Discussion Paper