Exercise 04: David Ricardo's Theory of Comparative Advantage in International Trade
(1)
| Country | Available man-hours | Industrial Goods (Cost per unit, man hours) |
Stone-age Goods (Cost per unit, man hours) |
| England | 270 | 15 | 30 |
| Portugal | 180 | 10 | 15 |
(2)
| Country | Production before trade | |
| Industrial Goods | Stone-age Goods | |
| England | 8 | ? |
| Portugal | ? | 6 |
| Total | ? | ? |
(3)
Now let's imagine that both countries specialize:
| Country | Production after trade | |
| Industrial Goods | Stone-age Goods | |
| England | 18 | ? |
| Portugal | ? | ? |
| Total | ? | ? |
What has happened to world production as a whole as a result of specialization? __________