In: Economics
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 States | 5 workers | 1 worker |
Thailand | 7 workers | 4 workers |
Total Production Before Trade
Country | Current Sock Production | Current Cell Phone Production |
United States | 14,000 | 70,000 |
Thailand | 10,000 | 17,500 |
Total | 24,000 | 87,500 |
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