Question

Answering only first Four parts as HOMEWORKLIB RULES rule.

unit labor requirement table :

 Home H foreign f Food F 3 3 Clothes C 2 1 Labor supply 1200 800

A) now country with lower Opportunity cost will have Comparative advantage in that good

So (aLF/aLC) = (3/2) < (aLF/aLC)* = 3

So Home has Comparative advantage in Food

.

b) foreign f has Comparative advantage in Clothes

.

c) PF/PC in home = Opportunity cost of production of F in Home

= 3/2 = 1.5

Relative price of F in foreign = 3/1 = 3

.

d) PPF , home ;

Max F = 1200/3 = 400, max C = 1200/2 = 600

graph, F on X axis, C on Y axis ,

slope of PPF = 6/4 = 3/2

foreign f

max F = 800/3, max C = 800/1 = 800

slope of ppf = 3

e) world supply Curve :

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