Wine Cheese
France
Wine - 2 hours/barrel
Cheese - 4 hours/pound
Italy
Wine - 6 hours/barrel
Chese - 10 hours/pound
1. The above table shows you the productivities of wine and cheese for French and Italian workers. Given these information, answer the following questions: (a) Which country has the comparative advantage in the production of wine? Which country has the comparative advantage in the production of cheese? (b) Suppose France and Italy are open to trade according to comparative advantage. When one unit of wine is traded, what is the range of mutually agreeable/beneficial trade in terms of cheese? Show all work.
Wine Cheese
France
Wine - 2 hours/barrel
Cheese - 4 hours/pound
Italy
Wine - 6 hours/barrel
Chese - 10 hours/pound
1. The above table shows you the productivities of wine and cheese for French and Italian workers. Given these information, answer the following questions: (a) Which country has the comparative advantage in the production of wine? Which country has the comparative advantage in the production of cheese? (b) Suppose France and Italy are open to trade according to comparative advantage. When one unit of wine is traded, what is the range of mutually agreeable/beneficial trade in terms of cheese? Show all work.
Related textbook solutions
Related questions
Consider the following production data for England and Portugal.
| England | Portugal | |
| Labor force | 25 | 200 |
| Number of bottles of wine | ||
| per worker | 40 | 50 |
| Number of wheels of cheese | ||
| per worker | 4 | 1 |
(a) Which country has an absolute advantage in the production of each good? Which country
has a comparative advantage in the production of each good?
(b) Suppose prices/wages are in terms of wine. Assuming each country spends 50% income on cheese and 50% on wine, with no trade, what is the wage and price of cheese in
each country? What is the total production of wine and cheese in each country?
(c) Suppose each country specializes in their comparative advantage good. After trade, what is the total global production of each good?
