Question

In: Economics

Suppose that each country currently has 140 workers and eachdecides to transfer some amount of...

Suppose that each country currently has 140 workers and each decides to transfer some amount of labor toward its area of comparative advantage. The United States transfers 15 workers away from socks toward producing cell phones. Thailand transfers 28 workers away from cell phones toward producing socks.

What will be the new total output of cell phones for both countries combined?

Country# of workers needed to
produce 1,000 units- Socks
# of workers needed to
produce 1,000 units- Cell Phones
United States5 workers1 worker
Thailand7 workers4 workers


Total Production Before Trade

CountryCurrent Sock ProductionCurrent Cell Phone Production
United States14,00070,000
Thailand10,00017,500
Total24,00087,500

Solutions

Expert Solution

Given that,

Each country has 140 workers:

Suppose that out of 140 workers, 70 workers were engaged in the production of socks and 70 workers were engaged in the production of cell phones

For USA:
1 worker will produce = 1000 units of cell phones

So,

70 workers will produce = 70 * 1000

= 70,000 units of cell phones

Now, it is given that United States transfers 15 workers away from socks toward producing cell phones,

So, the number of workers engaged in the production of cell phones increased to:

= 70 old workers + 15 new workers

= 85 workers

Hence, the new output of cell phones for USA:

= 85 workers * 1000

= 85,000 units of cell phones

For Thailand:
4 workers will produce = 1000 units of cell phones

so,

1 worker will produce = 250 units of cell phones

Therefore,

70 workers will produce = 70 * 250

= 17,500 units of cell phones

Now, it is given that Thailand transfers 28 workers away from cell phones toward producing socks,

So, the number of workers engaged in the production of cell phones decreased to:

= 70 old workers - 28 workers transferred

= 42 workers

Hence, the new output of cell phones for Thailand:

= 42 workers * 250 units

= 10,500 units of cell phones

Therefore, the new total output of cell phones for both countries combined will be:

= New output of cell phones for USA + New output of cell phones for Thailand

= 85,000 units + 10,500 units

= 95,500 units of cell phones


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