Consider the following unit labor requirements for two countries, Essos and Westeros, within the context of the Ricardian model of trade, where the two goods are food 1 (F) and horses (H) (you may assume that bushels and horses are equivalent units). PLEASE SEE ATTACHED SCREENSHOT FOR DATA.

(a) Which country has an absolute advantage in food? In horses? Why?

(b) Which country has the comparative advantage in food? In horses? Why?

(c) Assume that there is autarky, and both goods are produced in each country. What is the relative price of food in terms of horses in each?

(d) Now assume that there is free trade, and the free trade relative price falls exactly between the autarky prices you derived in part Graph this trading equilibrium in terms of relative supply and relative demand.

(e) Demonstrate, numerically, the gains from trade in Essos and Westeros (hint: rely on trade as an indirect method of production).

(f) Let the price of food, PF = 10 gold coins, and the price of horses, PH = 9 gold coins. Calculate the relative wage of the Westerosi to Essosi.

(g) What do you observe about the relative wage compared to relative productivities? What does this imply? **