Assignment
Part I. The Ricardian Model
1. At the beginning of the chapter there is a brief quotation from David Ricardo, and here is a longer version of what Ricardo wrote:
England may be so circumstanced, that to produce the cloth may require the labour of 100 men for 1 year; and if she attempted to make the wine, it might require the labour of 120 men for the same time. . . .To produce the wine in Portugal, might require only the labour of 80 men for 1 year, and to produce the cloth in the same country, might require the labour of 90 men for the same time. It would therefore be advantageous for her to export wine in exchange for cloth. This exchange might even take place, notwithstanding that the commodity imported by Portugal could be produced there with less labour than in England
Suppose that the amount of labor he describes can produce 1,000 yards of cloth or 1,000 bottles of wine in either country. Then answer the following questions:
a. Which country has absolute advantage in cloth and in wine? Explain why?
b. Which country has comparative advantage in wine? Explain why?
c. Will England and Portugal trade goods at “exchange rate” of 1 wine for 1 cloth in international trade? Explain why or why not
2. Refer to the following table and assume that the total labor supply in South Korea is 4 and the total labor supply in Vietnam is 8.
The post ECON4850- International Trade appeared first on My Assignment Online.