Interdependence and the Gains from Trade Algorithmic End of

Interdependence and the Gains from Trade : Algorithmic End of Chapter Graded Assignment | Read Chapter 3 | Back to Assignmen Due Sunday 06.17.18 at 11:45 PM Attempts: 5. Problems and Applications 05 England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 40 scones per hour or 1 sweater per hour. Keep the Highest: /4 Suppose that a scottish worker can produce 20 scones per hour or 2 sweaters per hour. workers have an absolute advantage in producing scones, and workers have an absolute advantage in producing sweaters workers have a comparative advantage in producing scones, and workers have a comparative advantage in producing sweaters. If England and Scotland decide to trade, Scotland will trade to England If an English worker could produce only 20 scones per hour, England gain from trade, and Scotland gain from trade Grade It Now Save & Continue Continue without saving

Solution

Given English worker can produce 40 scones or 1 sweater per hour and scottish worker can produce 20 scones or 2 sweaters per hour. Therefore,

1. English workers have an absolute advantage in producing scones and scottish workers have an absolute advantage in producing sweaters.

As the production ratio of scones and sweater of an english worker = 40:1 and

producttion ratio of scones and sweaters of an scottish worker = 20:2 = 40:4

2. English worker have a comparative advantage in producing scones and Scottish workers have a comparative advantage in producing sweaters.

As scotland can produce more sweaters than England

3. If England and Scotland decide to trade Scotland will trade sweaters to England.

If an English worker could produce only 20 scones per hour then it is equal to 20 scones ouptut of a scottish worker in a hour.

4. If an Englishh worker could produce only 20 scones per hour, England will not gain from trade, and Scotland will gain from trade.