*ONLY ANSWER PART 2*

questions e-g

Assume country A produces 2 goods, clothing (C) and food (F). Its production possibility frontier (PPF) is represented by the curve in Figure 1. Given that the domestic relative price of clothing in terms of food is 1, i.e., Pc/Pp = 1, country A produces at point Q. The world relative price of clothing is: P/PW = 1.5. Slope = -1 PPF Qc Country A Figure 1 (2 points) a. What information can you get from the curved PPF in Figure 1? (1 point) b. Explain why country A produces at point Q as displayed in Figure 1 when it does not trade with the world. (1 point) c. What can you say about the comparative advantage of country A compared to the world? (1 point) d. Discuss the potential trade pattern between country A and the rest of the world. (2 points) e. Suppose the world relative price of clothing increases to 1.8, i.e., DW / DW = 1.8. How does it affect the production and trade of country A? How does it affect country A's welfare? (2 points) f. According to the gravity model, how can country A increase its trade volume with the world? Give two suggestions. (You can assume there are only two countries in the world, country A and country B.) (2 points) g. Under what circumstance(s) will some groups of people in country A get hurt by free trade? Assume country A produces 2 goods, clothing (C) and food (F). Its production possibility frontier (PPF) is represented by the curve in Figure 1. Given that the domestic relative price of clothing in terms of food is 1, i.e., Pc/Pp = 1, country A produces at point Q. The world relative price of clothing is: P/PW = 1.5. Slope = -1 PPF Qc Country A Figure 1 (2 points) a. What information can you get from the curved PPF in Figure 1? (1 point) b. Explain why country A produces at point Q as displayed in Figure 1 when it does not trade with the world. (1 point) c. What can you say about the comparative advantage of country A compared to the world? (1 point) d. Discuss the potential trade pattern between country A and the rest of the world. (2 points) e. Suppose the world relative price of clothing increases to 1.8, i.e., DW / DW = 1.8. How does it affect the production and trade of country A? How does it affect country A's welfare? (2 points) f. According to the gravity model, how can country A increase its trade volume with the world? Give two suggestions. (You can assume there are only two countries in the world, country A and country B.) (2 points) g. Under what circumstance(s) will some groups of people in country A get hurt by free trade