Problem 1:

In a two country world (Haiti and the Dominican Republic), there are only two goodsproduced (Bread and Fish), one factor of production (labor) and Haiti's population is twice aslarge as the one of Dominican republic.

In addition, the following labor productivities (in hours) are given:

// Fish (1 kg) // Bread (1kg) //

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Haiti. // 3h. //. 2h //

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Dom Rep //. 1h. //. 1,5h //

There are only 20 hours of work per week towards the production of Fish and Bread at hand, and only the consumption value of ONE Fish plus ONE Bread equals 10 USD.

1. Under autarky, how "rich" are the people of these two countries?
2. Please show graphically as well as numerically, if and how the wealth position changes, when we liberalize trade between these two Caribbean nations.
3. How do we have to extend our model to make it more realistic?
4. How do these changes influence the essence of our analysis of part (b)? State some results and explain them to us.