Not necessary to solve part 1.

1. Compare the absolute and comparative advantages for two countries. Suppose there are two countries A and B producing two products X and Y. The unit labor requirement for two countries and two products are: ag = 1; a4 = 5; a3 = 10; a = 10 Which country has absolute advantage in producing X? Why? Which country has comparative advantage in producing X? Why? Suppose there are La = 100 identical workers inhabiting in the Country A, define the production possibility set and the production possibility frontier for Country A. (you can use either algebra or numbers) 2. Look at the country A only, suppose each worker has preferences U defined by: , UA = Biln(C) + 2ln(CA) where CA is the consumption level for product X and C4 is the consumption level for product Y. Find the autarky equilibrium for economy A. (hint: following the three major steps on the handout) And then describe the equilibrium for economy A. (hint: Given ... exogenous parameters, ...endogenous variables are solved, if ... conditions are satisfied.) 1. Compare the absolute and comparative advantages for two countries. Suppose there are two countries A and B producing two products X and Y. The unit labor requirement for two countries and two products are: ag = 1; a4 = 5; a3 = 10; a = 10 Which country has absolute advantage in producing X? Why? Which country has comparative advantage in producing X? Why? Suppose there are La = 100 identical workers inhabiting in the Country A, define the production possibility set and the production possibility frontier for Country A. (you can use either algebra or numbers) 2. Look at the country A only, suppose each worker has preferences U defined by: , UA = Biln(C) + 2ln(CA) where CA is the consumption level for product X and C4 is the consumption level for product Y. Find the autarky equilibrium for economy A. (hint: following the three major steps on the handout) And then describe the equilibrium for economy A. (hint: Given ... exogenous parameters, ...endogenous variables are solved, if ... conditions are satisfied.)