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Answer question 4 based on previous information.
1. Suppose that each worker in the home country can produce three loaves of bread or two shirts. Assume that Home has four workers a. Graph the production possiblities frontier for the Home country. b. What is the no-trade relative price for bread at Home? 2. Suppose that each worker in the Foreign country can produce two loaves of bread or three shirts. Assume that Foreign also has four workers. a. Graph the production possibilities frontier for the foreign country. b. What is the no-trade relative price for bread in Foreign? c. Using the information provided in problem 1 regarding Home, in which good does Foreign have a comparative advantage and why? Suppose that in the absence of trade, Home consumes nine loaves of bread and two shirts, while Foreign consumes two loaves of bread and 9 shirts. Add and indifference curve for each country to the figures in problems 1 and 2. Label the production possibilities frontier (PPF), indifference curve (U) and the no-trade equilibrium consumption and production for each country. 3. Type here to search
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