Gains from trade please complete the work sheet,

Interdependence and Gains from Trade

Number of Units Produced in One Hour

Food Clothing

England205

Scotland124

1. Each country works 10 hours per day. Create the PPF for each country, showing the table as well as the graph.

2. Who has the Absolute Advantage in Food? _______________ in Clothing?_________________

How did you determine who has the absolute advantage?__________________________________

________________________________________________________________________________

3. What is the Opportunity Cost for England forWhat is the Opportunity Cost for Scotland for

1 unit of Food?________________1 unit of Food?________________

1 unit of Clothing?_________________1 unit of Clothing?_________________

4. Who has the Comparative Advantage in Food? ______________ in Clothing?_______________

How did you determine who has the comparative advantage?_______________________________

________________________________________________________________________________

5. England should specialize in production of __________ and trade Scotland for ____________

Scotland should specialize in production of __________ and trade England for ____________

6. Prior to trade each country spends 5 hours a day producing each good (for a total of a 10 hr work day).Show how specialization and trade can make each country better off.

6a. Prior to trade or specialization:6b. After specialization before trade:

England:Food _____ Clothing _____England:Food_____ Clothing_____

(6hrs)(4hrs)

Scotland:Food _____ Clothing _____Scotland:Food_____ Clothing_____

(5hrs)(5hrs)

6c. After specialization and trade:6d. How much better off are they from part 1 to 3:

England:Food_____ Clothing_____England:Food_____ Clothing_____

Scotland:Food_____ Clothing_____Scotland:Food_____ Clothing_____

7. Illustrate on the graph of your PPF your answers to question 6a and 6c.