6. (L3) Consider a Ricardian model with two countries, the United States and the EU,

producing two goods, soap bars (S) and toothbrushes (T). Suppose the productivities

areaUS= 2 soap bars per worker,aEU= 4 soap bars per worker,aUS= 8 toothbrushesLS LS LT

per worker, andaEU= 4 toothbrushes per worker. Assume the United States has 3,200LT

workers and the EU has 4,000 workers.

(a) Plot the PPFs for both countries.

(b) Determine how much each country would produce if it specialized in its comparative advantage good.

(c) Now choose a plausible autarky production point on each country's PPF such that the world output of each good is exceeded by the outputs determined in part b.

(d) Determine a terms of trade between the two countries that will assure that both countries can consume more of both goods after trade.