Free trade and comparative advantage.The US and China produce robots (R) and automobiles (A). The US 1600 units of labor, whereas China has 2400. Prior to trade, the US consumes 30 R and 14 A. China consumes 30 R and 30 A. The units of labor needed to produce one robot and one automobile in each country are given in the following table:

LABOR PER R LABOR PER A

China 20 60

US 16 80

1. Which country has a comparative advantage in the production of each good?
2. Determine the production possibility frontier for each country, graphically and algebraically (in a separate graph for each country), putting A on the horizontal axis.Compute the current MRT in each country and discuss its meaning.
3. If both China and the US specialize according to their comparative advantage, and assuming that, after specialization, 10 A and 40 units of R are traded, label the pre-trade and the post-trade consumption points in the graph of each country. Explain. What isthe relative price of A in the above suggested trade?
4. Using the graphs of part b), show that both countries have gained from trade