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 | 5 |
| Portugal | 9 | 6 |
| Total | 17 | 11 |
(3)
Now let's imagine that both countries specialize:
| Country | Production after trade | |
| Industrial Goods | Stone-age Goods | |
| England | 18 | 0 |
| Portugal | 0 | 12 |
| Total | 18 | 12 |
What has happened to world production as a whole as a result of specialization? _Increased_________