2. Ricardian Model Closed Economy Equilibrium (30 points) Consider a world with two countries (US and China) and two products (Computer and iPhone). In the US it takes 1 worker to make one computer or 1 worker to make one iPhone. In China, it takes 2 workers to make one computer or 2 workers to make one iPhone. Let the utility of the representative agent in each country be: u=(C)%(I)% where C is the consumption of computers, I is the consumption of iPhones. 0 Will the two countries trade with each other? Why or why not? 0 Suppose now China receives a techonolgical upgrading in its iPhone sector and only takes 1 worker to produce 1 iPhone (this condition preserves for the rest of the questions). Will the two countries trade now? Which country has a comparative advantage in computers? Predict the trade patterns between the two economies (who exports what? who imports what?) 0 Suppose the US has 9 workers (LUS = 9), solve for and state the auturky national equilibrium for the US. Show allyour steps! (your nal answer should have the national consumption and production on computers U5 and iPhones, and a relative price pf'm) {Phone Open Economy Equilibrium (40 points) 0 Based on the updated unit labor requirements of two economies (the condition preserves, aie = 1), draw the line of specialization graph including the US and China. (the line is based on the world relative price W W) And briey explain the specialization patterns for two countries in each scenario. (make sure you iPhone explain all ve scenarios) W o If the world relative price W = 1, determine whether there will be gains from trade, and draw the gains iPhone from trade graph for both the US and China respectively (label before after PPF, CPI} slope, and indterence cuwes; imports and airports) W o In the Open Economy, suppose the world relative price is still W = 1, solve for the open economy pil'hune equilibrium for US and the China respectively (your nal answer should have the national consumption and production on Computers and iPhones; since the world relative price is given, you won't need to state it anymore). Lastly, calculate the total exports of China to the world. (US has 9 workers, Lus = 9; China has 36 workers, LCHN = 36). Individual utility function for each country is as: UCHN = (CCHN)%(ICHN)J uus = (CUSUUS, 0 Based on your previous calculation, can you infer if there is another third country in the world market