Economics: Two Islands Opportunity Cost

May 21st, 2016
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Two neighboring island countries, production, opportunity cost, jeans, wheat, Bellissima, Dolorium

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New #2:Consdier two neighboring island countries, Bellissima and Dolorium. Each has900,000 labor hours available per weel that it can use to produce wheat, jeans, or acombination of both. The following table shows the amount of labor hours requiredto produce one bushel of wheat or one pair of jeans._____________ (Dolorium, Bellissima) has an absolute advantage in the production ofwheat, and _______________ (Dolorium, Bellissima) has an absolute advantage in theproduction of jeans.Initially, suppose Bellissima uses 225,000 hours of labor per week to produce wheatand 675,000 hours per week to produce jeans. Consequently, Bellissima produces5,625 bushels of wheat and 67,500 pairs of jeans, and Dolorium produces 18,750bushels of wheat and 37,500 pairs of jeans. Assume there are no other countieswilling to trade goods, so in the absence of trade between these two countries, each

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