Instructions

Specialization in trade- based on Ricardo’s Theory: Given that two nations have equal resources and both nations agree to specialize in the production of a product that is most efficient, determine: a) Specialization between the two nations (which nation specializes in which product?) b) The range of terms of trade (trade negotiation terms) c) The best of terms of trade (democratic distribution of trade benefit) d) The net benefit for each country (after specialization) e) Discuss the limitations of production and export based on such assumption in the current global economy Use the following data to answer the above questions. Before specialization Products/Country Auto Plane Japan 20 10 US 10 10

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