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2. Ricardian Model Closed Economy Equilibrium (35 points) Consider a world with two countries (US and Mexico) and two goods (footballs and soccer balls). In
2. Ricardian Model Closed Economy Equilibrium (35 points) Consider a world with two countries (US and Mexico) and two goods (footballs and soccer balls). In the US it takes 2 workers to make a soccer ball or 1 worker to make a football. In Mexico, it takes 4 workers to make a soccer ball or 4 workers to make a football. Let the utility of the representative agent in each country be: 1 2 U = (CSB)3(CEB)3 where C 5 B is the consumption of soccer balls, cm is the consumption of footballs. 0 Which country has a comparative advantage in footballs? (use W. to represent the unit labor requirement, i.e., egg : 2) Predict the trade patterns between the two economies. 0 Suppose the US has 9 workers (LUS : 9), solve for and state the uutarky national equilibrium for the US. Show all your steps! (your final answer should have the national consumption and production on F3 and U5 SB, and a relative price 5%?) SB
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