Name Module 4 Featured Worksheet 2 Comparative Advantage: The Benefits of Trade The U.S. and England have the following production possibility curves. Fish Fish 80 100 50 20 -......... 15 20 Chips 25 50 Chips United States England Using the information from the graphs above to determine the following: 1. The U.S. has an absolute advantage in 2. England has an absolute advantage in 3. The opportunity cost of 1 unit of fish in the U.S. is 4. The opportunity cost of 1 unit of fish in England is 5. The opportunity cost of 1 unit of chips in the U.S. is 6. The opportunity cost of 1 unit of chips in England is 7. The U.S. has a comparative advantage in 8. England has a comparative advantage in9. Fill in the table below. Assume that without trade each country will produce at the point shown on its PPC. Assume that with trade, each country exports 1/2 of its production. Without Trade With Trade With Trade (production) (consumption) Chips Fish Chips Fish Chips Fish England U.S. Total 10. What happens to total world output when England and the U.S. specialize and trade? Why does this happen? 1 1. Are both England and the U.S. better off? Explain using numbers from the table. 12. Would the two countries trade if trade did not make them both better off? What assumption determined whether the two countries benefited from trade in this case? Explain whether or not this is a good assumption