Question
Assume the Ricardian model where the marginal product of labor in the home country is 3 in the apple industry and 2 in the beer
Assume the Ricardian model where the marginal product of labor in the home country is 3 in the apple industry and 2 in the beer industry. The home country has 10 workers. Home country consumption is 10 apples and 15 beers before trade and 12 apples and 16 beers after trade. The relative price of apples is 2 after trade.
a. What is the relative price of apples before trade?
b. What is the slope of the production function, where apples are on the vertical axis and beer on the horizontal axis?
c. Which good will the home country export? What is the quantity of its exports?
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