Comparative advantage

Output per worker

Wheat Cloth

Canada 12kg 3 metres

China 4kg . 2 metres

a) For each good determine which country has the absolute advantage and which country has the comparative advantage for that good.

b) At what set of relative prices do both countries gain from trade?

c)Show that both countries can consume more of both goods if Canada moves 10 workers into wheat production and exports 105 kg of wheat to China and China moves 20 workers into cloth production and exports 35 metres of cloth.