2.

a.

Why isn't trade among countries like a game with some winners and some losers?

b.

If demand is elastic, how will an increase in price change total revenue? Explain.

c.

England and Scotland both produce scones and sweaters. Suppose that an English worker can produce 100 scones per hour or 2 sweater per hour. Suppose that a Scottish worker can produce 80 scones per hour or 4 sweaters per hour.

i.Which country has the absolute advantage in the production of each good? Which country has the comparative advantage?

ii.If England and Scotland decide to trade, which commodity will Scotland trade to England? Explain.

iii.If a Scottish worker could produce only 2 sweater per hour, would Scotland still gain from trade? Would England still gain from trade? Explain.