COMPARATIVE ADVANTAGE
Consider the following data for two countries: England and Portugal:
Output per Unit of Labor
Wine (barrels) Cloth (yards)
England 16 8
Portugal 4 1
Does either country have an absolute advantage in producing Wine? Cloth? Explain.
Construct a table indicating the opportunity costs for each good in each country. Using this table explains the comparative advantage of each country.
How would Ricardo expect trade to develop between these countries if no restrictions are applied?
Why would Ricardo conclude that trade between these two countries would benefit both? What key assumption does he make in reaching this conclusion?
Why would an English mercantilist object to Ricardoâs conclusion? What policies might that mercantilist then propose for England?
COMPARATIVE ADVANTAGE
Consider the following data for two countries: England and Portugal:
Output per Unit of Labor
Wine (barrels) Cloth (yards)
England 16 8
Portugal 4 1
Does either country have an absolute advantage in producing Wine? Cloth? Explain.
Construct a table indicating the opportunity costs for each good in each country. Using this table explains the comparative advantage of each country.
How would Ricardo expect trade to develop between these countries if no restrictions are applied?
Why would Ricardo conclude that trade between these two countries would benefit both? What key assumption does he make in reaching this conclusion?
Why would an English mercantilist object to Ricardoâs conclusion? What policies might that mercantilist then propose for England?
