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5. The following table provides data on labor productivity for two countries, the US and the EU, in the production of Cloth and Wine.
5. The following table provides data on labor productivity for two countries, the US and the EU, in the production of Cloth and Wine. Labor productivity, Units of output per hour Cloth Countries USA ER 3 9 Wine 6 a) Explain, using the data in the table, what the difference is between "absolute" and "comparative" advantage. b) Assume that the EU and the USA engage in free trade. What will the pattern of international trade be (i.e., what good will each country export and what will it import)? Explain. c) As a result of globalization, a country can experience a decline in employment in a sector in which it has a greater productivity than its trading partner. Explain using the table above in which sector this will occur for the EU and discuss why it need not lead to a national welfare loss.
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