Consider the following production data for England and Portugal.
Consider the following production data for England and Portugal.
| England | Portugal | |
| Labor force | 25 | 200 |
| Number of bottles of wine | ||
| per worker | 40 | 50 |
| Number of wheels of cheese | ||
| per worker | 4 | 1 |
(a) Which country has an absolute advantage in the production of each good? Which country
has a comparative advantage in the production of each good?
(b) Suppose prices/wages are in terms of wine. Assuming each country spends 50% income on cheese and 50% on wine, with no trade, what is the wage and price of cheese in
each country? What is the total production of wine and cheese in each country?
(c) Suppose each country specializes in their comparative advantage good. After trade, what is the total global production of each good?
