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Could you please provide a step-by-step solution? I would be grateful! Thanks in advance. Problem 1. (Ricardian model) [week 2]. Consider two countries, Home and
Could you please provide a step-by-step solution? I would be grateful! Thanks in advance.
Problem 1. (Ricardian model) [week 2]. Consider two countries, Home and Foreign which are closed to international trade. Home has 1200 units of labor available, and Foreign has 800 units. Both countries can produce two goods: apples and bananas. Home's unit labor requirement in apple production is 3, while in banana production is 2. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. a) Graph Home and Foreign's production possibility frontier. b) Compute Home and Foreign's opportunity cost of apples in terms of bananas. Explain. c) In the absence of trade, compute the price of apples in terms of bananas at Home and Foreign, assuming that consumers in each country like to consume both goods. ExplainStep by Step Solution
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