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Consider the Ricardian model with two economies (Mexico and the U.S.A.) and two commodities (goods and services). The marginal products of labor for each commodity
Consider the Ricardian model with two economies (Mexico and the U.S.A.) and two commodities (goods and services). The marginal products of labor for each commodity are as follows: Services and Goods for Mexico MPL*S = 1/4 for services and for goods it is MPL*G = 1/2 for U.S.A. the services is MPLS = 1 and MPLG = 1 is the goods. Assume the two economies are closed and prices of Services are: pS = $2, and p*S = 12 pesos. (a) Calculate the qaurterly price of Goods in both countries: pG, and p*G.
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