Comparative_advantage_illustration_UPDATE

Comparative_advantage_illustration_UPDATE - : 60...

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Output per Worker per Hour Wine Cloth England 4 liters 10 sq. m Portugal 8 liters 12 sq. m Productivity: Wine: England: 4 liters/hour Portugal: 8 liters/hour Portugal has the Absolute Advantage in producing wine. Cloth: England: 10 sq. m/hour Portugal: 12 sq. m /hour Portugal has the Absolute Advantage in producing cloth.
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Opportunity Cost per Unit of: Wine Cloth England 5/2 cloth 2/5 wine Portugal 3/2 cloth 2/3 wine Opportunity Cost: 1 Wine: England: 5/2 cloth Portugal: 3/2 cloth Portugal has the Comparative Advantage in producing wine. 1 Cloth: England: 2/5 wine Portugal: 2/3 wine England has the Comparative Advantage in producing cloth.
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Autarky: Production = Consumption Wine Cloth England 240 liters 400 sq. m Portugal 480 liters 480 sq. m BOTH countries are producing efficiently: England : 60 worker/hours wine + 40 worker/hours cloth=100 worker/hours Portugal
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Unformatted text preview: : 60 worker/hours wine + 40 worker/hours cloth=100 worker/hours Production with Trade Wine Cloth England 0 liters 1000 sq. m Portugal 800 liters 0 sq. m Suppose : Portugal trades 300 wine to England for 580 cloth. What is being consumed in the two countries? Consumption with Trade Wine Cloth England 300 liters 420 sq. m Portugal 500 liters 580 sq. m Both countries can consume more cloth AND more 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...
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Comparative_advantage_illustration_UPDATE - : 60...

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