The following table describes the number of yards of cloth

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The following table describes the number of yards of cloth

The following table describes the number of yards of cloth and barrels of wine that can be
produced with a week’s worth of labor in England and Portugal. Assume that no other inputs
are needed.

a. If there is no trade, what is the price of wine in terms of cloth in England?

b. If there is no trade, what is the price of wine in terms of cloth in Portugal?
c. Suppose each country has 1 million weeks of labor available per year. Draw the production
possibilities frontier for each country.
d. Which country has an absolute advantage in the production of which good(s)? Which country
has a comparative advantage in the production of which good(s)?
e. If the countries start trading with each other, which country will specialize and export which
good?
f. What can be said about the price at which trade will takeplace?

The following table describes the number of yards of cloth

ANSWER
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