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Compare the autarky and free trade equilibrium Compare the autarky and free trade equilibrium for the following two economies: Narnia Shadowrealm Labor force 90 200

Compare the autarky and free trade equilibrium

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Compare the autarky and free trade equilibrium for the following two economies: Narnia Shadowrealm Labor force 90 200 Number of shirts one worker can produce 36 160 Number of cars one worker can produce 12 4 Assume that people in both countries spend half their income on shirts and cars. Assume also that each worker supplies one unit of labor. 1. Explain the concept of comparative advantage. Explain for this case what is the comparative advantage for each country and why. 2. Show the total world production and per country production, if both countries are in autarky, and half of the workers in each country produce each good. 3. Show the free trade equilibrium. Clearly state: the individual demands for each country and each good (1;, the prices for both goods p3, the wages for both countries wt, the aggregate production for each good Y3: and the the aggregate demand for each good Q3

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