absolute advantage paper
Compose a two page paper. Address the following subject matter in your paper. Use information from the reading to gather your ideas. It may help to explain if you use a table in your paper to demonstrate but this up to you.
England and Scotland both produce scones and sweaters. Suppose the English workers can produce 50 scones per hour or one sweater per hour. Suppose that Scottish workers can produce 40 scones per hour or two sweaters per our.
A. Which country has the absolute advantage in production of each good? Which country has the comparative advantage?
England has the complete advantage when making scones. However, Scotland has complete advantage when producing sweaters.
England has comparative advantage in scone production.
Scotland has comparative advantage in sweater production.
B. If England and Scotland decided to trade, which commodity will Scotland trade to England? Explain.
If England and Scotland decided to trade, it would be most beneficial for Scotland to trade their produced sweaters. Trading Sweater is most beneficial to everyone because Scotland has the comparative advantage in sweater production. This means that when producing one sweater Scotland is only has to give up twenty scones. Now for England the price of producing one sweater is greater because they are giving up fifty scones. So as you can see Scotland specializes better in sweater production, which is why it is best for them to trade that commodity with England.
C. If a Scottish worker could produce only one sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain
Yes, if a Scottish worker could produce only one sweater per hour, they would still have comparative advantage in sweater production. One sweater would now mean that they would only lose forty scones as apposed to England’s fifty scones.
Scones/per hour Sweater(s)/per hour Comparative Advantage Absolute Advantage
England 50 1 Comparative advantage in scone
England and Scotland both produce scones and sweaters. Suppose the English workers can produce 50 scones per hour or one sweater per hour. Suppose that Scottish workers can produce 40 scones per hour or two sweaters per our.
A. Which country has the absolute advantage in production of each good? Which country has the comparative advantage?
England has the complete advantage when making scones. However, Scotland has complete advantage when producing sweaters.
England has comparative advantage in scone production.
Scotland has comparative advantage in sweater production.
B. If England and Scotland decided to trade, which commodity will Scotland trade to England? Explain.
If England and Scotland decided to trade, it would be most beneficial for Scotland to trade their produced sweaters. Trading Sweater is most beneficial to everyone because Scotland has the comparative advantage in sweater production. This means that when producing one sweater Scotland is only has to give up twenty scones. Now for England the price of producing one sweater is greater because they are giving up fifty scones. So as you can see Scotland specializes better in sweater production, which is why it is best for them to trade that commodity with England.
C. If a Scottish worker could produce only one sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain
Yes, if a Scottish worker could produce only one sweater per hour, they would still have comparative advantage in sweater production. One sweater would now mean that they would only lose forty scones as apposed to England’s fifty scones.
Scones/per hour Sweater(s)/per hour Comparative Advantage Absolute Advantage
England 50 1 Comparative advantage in scone