The UK and Poland both produce cakes and coats. Suppose that a British worker can produce 50 cakes per hour or 1 coat per hour. Suppose that a Polish worker can produce 40 cakes per hour or 2 coats per hour.

a. Which country has the absolute advantage in the production of each good? Which country has the comparative advantage? [5 marks]

b. If the UK and Poland decide to trade, which commodity will Poland trade to the UK? Explain. [5 marks]

c. If a Polish worker could produce only 1 coat per hour, would Poland still gain from trade? Would the UK still gain from trade? Explain. [5 marks]

d. Explain how absolute advantage and comparative advantage differ.