Calculate the gains from trade for each country

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Reference no: EM132036270

Question

Use the data in the table to answer the question below. Assume that the labor cost of wheat and cloth is constant in each nation:

	US	Rest of World
Wheat (Bushels/Labor-Hour)	.50	.40
Cloth (Yards/Labor-Hour)	.25	1.00

If the international price is set at one, and the two countries decided to trade 20 units of wheat for 10 units of cloth, calculate the gains (losses) from trade for each country.

Reference no: EM132036270

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