Italy and Greece producing olives (one product).
Output: 120 units Output: 60 units
Labor: 30 workers Labor: 30 workers
Wages: $3 Wages: $2
Exports: $100 Exports: $50
(Calculate productivities for Italy and Greece and the Italy's relative productivities for each industry if there is more than one product. Compare Italy's relative productivity by industry (here we have one industry) with the relative wage ratio of Italy over Greece (1) above)
- Arelative export performance comparative advantageforItalyover Greece in olives is measured by a ratio of Italian exports of olives to Greek exports that exceeds one. Calculate this ratio and consider it the real world (2) above.
- Determine thecomparative advantage according to the classical model. Is the classical model's prediction of comparative advantage consistent with the comparative advantage in relative export performance given by the above example?