England and Scotland both produce scones and sweaters. Suppose that an English w
ID: 1136846 • Letter: E
Question
England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 50 scones per hour or 1 sweater per hour. Suppose that a Scottish worker can produce 40 scones per hour or 2 sweaters per hour. Make the required calculations in the table below-show work! NUMBER OF UNITS PRODUCED PER HOUR SCONES SWEATERS ENGLAND 50 SCOTLAND 40 Which country has the absolute advantage in the production of each good? Which country has the comparative advantage? a. b. If England and Scotland decide to trade, which commodity will Scotland export to England? Explain If a Scottih worker could produce only 1 sweater per hour,would S gain from trade? Explain c. otland still gain from trade? Would England stillExplanation / Answer
a) Because English workers can produce 50 scones per hour which is 10 more than Scottish workers who can produce 40 scones an hour, they have an absolute advantage in producing scones.
Because Scottish workers can produce 2 sweaters compared with English workers who can only produce 1, they have an absolute advantage.
This we have to see what the opportunity cost of producing a good. The opportunity cost of an English worker producing a sweater is 50 scones. This is because if they spend an hour producing a sweater, they could have been producing 50 scones.
The opportunity cost of a Scottish worker producing a sweater is 20 scones. This is because in an hour they can produce 2 sweaters or 40 scones. Therefore, for each sweater they lose 20 scones.
This means that Scottish workers have a comparative advantage in Sweater and English workers have a comparative advantage in Scones.
b) Scotland will export Sweater to England because Scotland will specialize in the production of Sweater because we just saw that the opportunity cost of producing Sweater in Scotland is low.
c) Now also Scotland will specialize in the production of Sweater because the opportunity of producing Sweater is 40 which is less than England and yes there will still be gains from the trade.
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