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(20 pts) Assume the global price of apples relative to beer is 2 to 1. i. Which good will each country specialize in producing? ii.
(20 pts) Assume the global price of apples relative to beer is 2 to 1. i. Which good will each country specialize in producing? ii. Assume that tastes are identical in each country. (Hint: recall the implications of this statement for the location of the indifference curves.). Graph the world price line and a new indifference curve U2 and U2* respectively, for each country iii. Label the exports and imports for each country. Compare the exports of Home to the imports of Foreign iv. Briefly explain how each country gains from trade
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