Analyze the following (2x2) matrix.Identify the countries having certain advantages.Moreover, specify the benefits of trade for both countries. Matrix A Wheat (bushels/labor hour )Cloth (yards/labor hour)United States64U.K.13(Numerical values reflect output per unit of input)Will trade occur? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth.Identify the production possibility frontiers for both countries.Show the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.

The theory of Absolute advantage is created by Adam Smith. If a country produces more of a good than…

Answered: Analyze the following (2x2) matrix.…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter33: International Trade

Section: Chapter Questions

Problem 2SCQ: Brazil can produce 100 pounds of beef or 10 autos. In contrast the United States can produce 40...

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Analyze the following (2x2) matrix.

Identify the countries having certain advantages.

Moreover, specify the benefits of trade for both countries.

Matrix A

	Wheat (bushels/labor hour )	Cloth (yards/labor hour)
United States	6	4
U.K.	1	3

(Numerical values reflect output per unit of input)

Will trade occur? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth.
Identify the production possibility frontiers for both countries.
Show the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.

Definition Video Definition Ability of a country to produce more output with a given level of input or to produce the same level of output with a lower level of input as compared to the other countries. For example, if Country A produces 200 units with the help of 10 units of labor, and Country B produces 300 units with 10 units of labor, Country A has an absolute advantage in the production of the good. Video

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