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Home Country Foreign Country X=QLT, Q-8 X=alr, a=3 Y-BLy, B=4 Y=BLy, B=6 LH - Lx + Ly =50 LF = Lx + Ly - 100

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Home Country Foreign Country X=QLT, Q-8 X=alr, a=3 Y-BLy, B=4 Y=BLy, B=6 LH - Lx + Ly =50 LF = Lx + Ly - 100 Answer the following questions based on the above given information. a) Calculate the autarky prices (Px/Py) in each country? (5 points) b) If the free trade price is P*=1, describe the pattern of trade between the home and foreign countries. (5 points) c) If each country specializes in their comparative advantage, how much X and Y will each country produce in free trade? (5 points) d) Suppose that the home country's productivity level in sector Y grows to 12 (i.e. B = 12) and the foreign country's productivity level in sector X grows to 9 (i.e. a = 9) at the same time. If the free trade price is still P*=1, describe how the two productivity changes impact the autarky prices (Px/Py) in each country, free trade production, and the pattern of free trade. (10 points)

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