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2. If the pattern of unit labour costs are: Home Foreign Good 1: 12 5 Good 2: 4 20 i) Which country has a comparative
2. If the pattern of unit labour costs are: Home Foreign Good 1: 12 5 Good 2: 4 20 i) Which country has a comparative advantage in producing good 1? ii) What are the autarky price ratios in each country? iii) if both goods are produced in free trade, what are the range of prices that are possible? iv) Suppose that the world price is unity. What is the relative wage between the two countries? v) If the price of good one rises by 10%, which country gains and by how much
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