Question
Please answer as detailed as possible David Ricardo's example of international trade considered two countries (England and Portugal) and two goods (wine and cloth). The
Please answer as detailed as possible
David Ricardo's example of international trade considered two countries (England and Portugal) and two goods (wine and cloth). The following information describes the number of hours needed to produce a given number of units of the good in question in the respective countries.
England
Cloth 4
Wine 8
Portugal
Cloth 4
Wine 2
a) Which country has an absolute advantage in producing cloth? Which country has an absolute advantage in producing wine?
b) What is the opportunity cost of producing cloth in England? What is the opportunity cost of producing cloth in Portugal? Which country has a comparative advantage in producing cloth?
c) If the two countries are allowed to trade, what will Portugal export?
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