ii. For the home country, What is the opportunity cost of producing Agriculture in terms of Manufactures? iii. What good[s) does the foreign country have an absolute advantage in producing? iv. For the foreign country, what is the opportunity cost of producing Agriculture in terms of Manufactures? b. Suppose the home and foreign countries are engaged in free trade. Initially, it is the case that the wage rate (w*] in the foreign country is $20 [w*=20) and both countries produce the agricultural good. [Hintz Home is going to be incompletely specialized and Foreign is going to be completely specialized] i. What is the price of the agricultural good? ii. What is the wage rate of the home country? iii. What is the price of manufactures? Which good(s) does the home country export and which good(s) does the foreign country export? c. Suppose the home and foreign countries are engaged in free trade. Now, there is technological progress in the foreign country in the Manufactures sector so that the marginal product of labor in Manufactures increases from 2 to 10 (a 400% increase). If the foreign wage rate increases to $22 and the home wage rate does not change (i.e., the same as in part b), Clemson University, Department of Economics Spring 2022 ECON 4120 Problem Set 1 Due Feb./3/2022 (Thu.) at 11am Please send your solution to Lan Lan at llan@g.clemson.edu Professor Cheng Chen 1. [40 Points: 10, 15, 15] Suppose the costs of production depend only on labor costs and that each unit of labor produces the quantity of each commodity listed in the table below. Manufactures Agriculture Home 10 5 Foreign 2 4 a. Suppose the home and foreign countries are engaged in free trade. i. What good[s) does the home country have an absolute advantage in producing? ii. For the home country, what is the opportunity cost of producing Agriculture in terms of Manufactures? iii. What good(s) does the foreign country have an absolute advantage in producing? iv. For the foreign country, what is the opportunity cost of producing Agriculture in terms of Manufactures