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.…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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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.

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