Consider a world that consists of two countries, Domestic and Foreign, in a Ricardian model setting. Suppose Domestic has LD = 100 workers and Foreign has L F = 20 workers. The output that one worker can produce in each country in terms of each good is given in the following table:

	Cloth	Widgets
Domestic	10	20
Foreign	60	30

1.1 What is the opportunity cost of cloth in Foreign in terms of widgets?

1.2 Which of the following statements is true?

A Home has a comparative advantage in widgets

B Foreign has a comparative advantage in widgets

C Home has a comparative advantage in widgets and cloth

D Neither country has a comparative advantage in widgets

1.3 What is the total amount of cloth that will be produced in the free-trade equilibrium?

1.4 What is the total number of widgets that will be produced in the free-trade equilibrium?

1.5 All else equal, if Domestic workers become twice as productive, Domestic should:

A Sell cloth to Foreign and buy widgets from Foreign

B Sell widgets to Foreign and buy cloth from Foreign

C Sell cloth and widgets to Foreign

D Buy cloth and widgets from Foreign

E Stop trading with Foreig