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Gains from trade please complete the work sheet,
Interdependence and Gains from Trade
Number of Units Produced in One Hour
1. Each country works 10 hours per day. Create the PPF for each country, showing the table as well as the graph.
2. Who has the Absolute Advantage in Food? _______________ in Clothing?_________________
How did you determine who has the absolute advantage?__________________________________
3. What is the Opportunity Cost for England forWhat is the Opportunity Cost for Scotland for
1 unit of Food?________________1 unit of Food?________________
1 unit of Clothing?_________________1 unit of Clothing?_________________
4. Who has the Comparative Advantage in Food? ______________ in Clothing?_______________
How did you determine who has the comparative advantage?_______________________________
5. England should specialize in production of __________ and trade Scotland for ____________
Scotland should specialize in production of __________ and trade England for ____________
6. Prior to trade each country spends 5 hours a day producing each good (for a total of a 10 hr work day).Show how specialization and trade can make each country better off.
6a. Prior to trade or specialization:6b. After specialization before trade:
England:Food _____ Clothing _____England:Food_____ Clothing_____
Scotland:Food _____ Clothing _____Scotland:Food_____ Clothing_____
6c. After specialization and trade:6d. How much better off are they from part 1 to 3:
England:Food_____ Clothing_____England:Food_____ Clothing_____
Scotland:Food_____ Clothing_____Scotland:Food_____ Clothing_____
7. Illustrate on the graph of your PPF your answers to question 6a and 6c.