According to ricardo theory of comparative advantage

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Suppose there are two countries of equal size, Northampton and Southampton. Both countries both produce and consume two goods: food and clothes. If both countries used all their resources to produce only food, Northampton would produce 50 tons while Southampton would produce 400 tons. If both countries used all their resources to produce only clothes, Northampton would produce 100 tons while Southampton would produce 200 tons. According to Ricardo’s theory of comparative advantage, what should these countries do in order to maximize their own ability to consume clothes and food? Should they specialize in any one product? If so, which country should specialize in what product? Should they trade with each other?

Reference no: EM131146256

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