Can you argue that markets workperfectly (with respect to efficiency and equity), and government's role should be minimal? Justify your position.

Define absolute advantage and comparative advantage.Which concept is more useful in explaining trade patterns?Why?

Using the tables below to answer this question[the tables indicate the combinations of wine and cheese thateach country can produce in aday].

FranceUnited States (U.S.)

WineCheeseWineCheese

(Bottles)(Pounds)(Bottles)(Pounds)

08015

16112

2429

3236

4043

50

a) Does France or the U.S. have an absolute advantage in either product?Explain.

b) Does France or the U.S. have a comparative advantage in either product?Explain and provide relevant quantitative details.

c) If France is currently producing 1 bottle of wine and 6 pounds of cheese, and the U.S. is currently producing 3 bottles of wine and 6 pounds of cheese, would both countries be better off by specializing in one good and trading (based on comparative advantage, of course)?{Assume the trade is 3 bottles ofwine for 7.5 pounds of cheese.}Provide relevant details.

d) Are there any potential political ramifications if specialization and trade take place?Elucidate.