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Strategies for Global Value Added: Gains Comparative advantage - page 11 / 30

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11

Comparative advantage and gains from trade

Suppose that England exports 54 sweaters and imports 72 bicycles

For 72 bicycles, England can shift four units of labor to sweaters since 72/18 = 4

Shifting 4 units of labor to sweaters produces

4 x 24 = 96 sweaters, therefore England’s

net gain in sweaters:        96 - 54 = 42

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