Consider the following two country-two goods world, with a single input, labor: Daily production per worker Portugal England Commodity Wine (barrels) OR Cloth (bolts) 4 OR 3 a) Does either country have absolute and/or comparative advantage in any product? b) Following your answer to part a, is there any advantage in trading here? At what "prices" (cloth per unit of wine, or wine per unit of cloth) will such trade occur? In other words, what is the maximum amount of cloth relative to wine at which trade will occur? What is the minimum amount? (2 points, think about this carefully. Hint: you won't pay someone else for a product a higher price than what you can make it at! Think about opportunity costs) Suppose the cost of labor to produce daily output of each good in each country is 20 in England, and E1600 in Portugal (for example, with 20 you could produce either 1 barrel of wine OR 3 bolts of cloth in England). Further, if the current exchange rate is 1=E50, what is the price of the goods in each country in pounds? d) What will the exchange rate have to be to discourage Portuguese imports of British goods? Similarly, what will the exchange rate have to be to discourage British imports of Portuguese goods? Consider the following two country-two goods world, with a single input, labor: Daily production per worker Portugal England Commodity Wine (barrels) OR Cloth (bolts) 4 OR 3 a) Does either country have absolute and/or comparative advantage in any product? b) Following your answer to part a, is there any advantage in trading here? At what "prices" (cloth per unit of wine, or wine per unit of cloth) will such trade occur? In other words, what is the maximum amount of cloth relative to wine at which trade will occur? What is the minimum amount? (2 points, think about this carefully. Hint: you won't pay someone else for a product a higher price than what you can make it at! Think about opportunity costs) Suppose the cost of labor to produce daily output of each good in each country is 20 in England, and E1600 in Portugal (for example, with 20 you could produce either 1 barrel of wine OR 3 bolts of cloth in England). Further, if the current exchange rate is 1=E50, what is the price of the goods in each country in pounds? d) What will the exchange rate have to be to discourage Portuguese imports of British goods? Similarly, what will the exchange rate have to be to discourage British imports of Portuguese goods