B. Now consider the free trade situation. P car P* TV 13. You now know that the relative price of cars in Foreign is country export? Explain why. = 2. Which good will each 14. Suppose the world relative price of televisions in the trade equilibrium is What is the real wage in Home in terms of cars in the trade equilibrium? PTV Pear. trade 15. * What is the real wage in Home in terms of televisions in the trade equilibrium? = 1. 16. How can you conclude Home is better off because of trade? (hint: check the real wage)

B. Now consider the free trade situation. 13. You now know that the relative price of cars in Foreign is PTVPcar=2. Which good will each country export? Explain why. 14. Suppose the world relative price of televisions in the trade equilibrium is (PcarPTV)trade=1. What is the real wage in Home in terms of cars in the trade equilibrium? 15. * What is the real wage in Home in terms of televisions in the trade equilibrium? 16. How can you conclude Home is better off because of trade? (hint: check the real wage) B. Now consider the free trade situation. 13. You now know that the relative price of cars in Foreign is PTVPcar=2. Which good will each country export? Explain why. 14. Suppose the world relative price of televisions in the trade equilibrium is (PcarPTV)trade=1. What is the real wage in Home in terms of cars in the trade equilibrium? 15. * What is the real wage in Home in terms of televisions in the trade equilibrium? 16. How can you conclude Home is better off because of trade? (hint: check the real wage)