Example - Both are efficient but Portugal is less...

Info iconThis preview shows pages 1–5. Sign up to view the full content.

View Full Document Right Arrow Icon
Output per Worker per Hour Wine Cloth England 5 liters 15 sq. m Portugal 4 liters 8 sq. m Productivity: Wine: England: 5 liters/hour Portugal: 4 liters/hour England has the Absolute Advantage in producing wine. Cloth: England: 15 sq. m/hour Portugal: 8 sq. m /hour England has the Absolute Advantage in producing cloth.
Background image of page 1

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Opportunity Cost per Unit of: Wine Cloth England 3 cloth 1/3 wine Portugal 2 cloth 1/2 wine Opportunity Cost: 1 Wine: England: 3 cloth Portugal: 2 cloth Portugal has the Comparative Advantage in producing wine. 1 Cloth: England: 1/3 wine Portugal: 1/2 wine England has the Comparative Advantage in producing cloth.
Background image of page 2
Autarky: Production=Consumption Wine Cloth England 200 liters 900 sq. m Portugal 200 liters 400 sq. m BOTH countries are producing efficiently: England : 40 worker/hours wine + 60 worker/hours cloth=100 worker/hours Portugal : 50 worker/hours wine + 50 worker/hours cloth=100 worker/hours
Background image of page 3

Info iconThis preview has intentionally blurred sections. Sign up to view the full version.

View Full DocumentRight Arrow Icon
Background image of page 4
Background image of page 5
This is the end of the preview. Sign up to access the rest of the document.

Unformatted text preview: Both are efficient but Portugal is less productive. Production with Trade Wine Cloth England 0 liters 1500 sq. m Portugal 400 liters 0 sq. m Suppose : Portugal trades 200 wine to England for 500 cloth. What is being consumed in the two countries? Consumption with Trade Wine Cloth England 200 liters 1000 sq. m Portugal 200 liters 500 sq. m Both countries can consume more cloth while consuming the same amount of wine: both have benefited from trade. WINNERS FROM TRADE 1) Portuguese wine producers and workers 2) Portuguese cloth consumers 3) English cloth producers and workers 4) English wine consumers LOSERS FROM TRADE 1) English wine producers and workers 2) English cloth consumers 3) Portuguese cloth producers and workers 4) Portuguese wine consumers...
View Full Document

Page1 / 5

Example - Both are efficient but Portugal is less...

This preview shows document pages 1 - 5. Sign up to view the full document.

View Full Document Right Arrow Icon
Ask a homework question - tutors are online