Consider a world that consists of only 2 countries: USA (U) and Korea (K). Each country can produce only 2 products: beef and potatoes. USA can produce 1000 tons of beef and no potatoes, or 750 tons of potatoes and no beef, or any linear combination of beef and potatoes between these two combinations. Korea can produce 1800 tons of beef and no potatoes, or 1200 tons of potatoes and no beef, or any linear combination of beef and potatoes between these two combinations. Countries can freely trade with each other."

1. assume the equilibrium price of potatoes is $8/kg and Pmax and Pmin are the maximum and minimum possible equilibrium prices of beef. Let P1 be the equilibrium price of beef that satisfies Pmax>P1>Pmin. Assume now that the price of beef increases from P1 to P2>P1 in such a way that it is still true that Pmax>P2>Pmin. In this case, people in USA will

There is not enough information to answer this question

be worse off

have the same utility as before

be better off

2.Assume that people in this model would like to consume equal amounts of beef and potatoes. Given such preferences, which country will benefit from trade?

Neither

Both

Korea only

USA only

There is not enough information to answer this question