ECN 101
Class Activity
Chapter 3
Prof. Ali
Answer the following questions.
Chapter 3: Interdependence and gain from trade
1. Assume that England and Spain produce cheese and bread. The table below shows the
amount of each good that the countries can produce in one hour .
Amounts of goods produced in one hour
Cheese Bread
England 40 (10/40=.25) 10 (40/10=4)
Spain 10 (80/10= 8) 80 (10/80=.125)
The calculations are to find the opportunity cost
Comparative Production= the number that is smaller
Cheese = .25 vs. 8
.25 is lower so England has the comparative production
a. Who has a comparative advantage in the production of cheese?
England
b. Who has a comparative advantage in the production of bread?
Spain
c. Which country should be exporting chees and which country should be exporting
bread based on the theory of comparative advangate? Explain your answer.
England should be exporting Cheese
Spain should be exporting Bread
Assume that both countries each has 100 hours available for production. Originally,
when there is no trade, each country divided its time equally between the production of
cheese and bread. Now, each country spends all its time producing the good in which it
has a comparative advantage.
d. By how much will the production of cheese increase as a result of trade?
England ( 40x100) = 400 cheeses
e. By how much will the production of bread increase as a result of trade?
Class Activity
Chapter 3
Prof. Ali
Answer the following questions.
Chapter 3: Interdependence and gain from trade
1. Assume that England and Spain produce cheese and bread. The table below shows the
amount of each good that the countries can produce in one hour .
Amounts of goods produced in one hour
Cheese Bread
England 40 (10/40=.25) 10 (40/10=4)
Spain 10 (80/10= 8) 80 (10/80=.125)
The calculations are to find the opportunity cost
Comparative Production= the number that is smaller
Cheese = .25 vs. 8
.25 is lower so England has the comparative production
a. Who has a comparative advantage in the production of cheese?
England
b. Who has a comparative advantage in the production of bread?
Spain
c. Which country should be exporting chees and which country should be exporting
bread based on the theory of comparative advangate? Explain your answer.
England should be exporting Cheese
Spain should be exporting Bread
Assume that both countries each has 100 hours available for production. Originally,
when there is no trade, each country divided its time equally between the production of
cheese and bread. Now, each country spends all its time producing the good in which it
has a comparative advantage.
d. By how much will the production of cheese increase as a result of trade?
England ( 40x100) = 400 cheeses
e. By how much will the production of bread increase as a result of trade?
