Q1. Assuming in Home, one worker can produce 2 bushels of wheat or 6 yards of cloth. One Foreign worker can produce 1 bushel of wheat, or 2 yards of cloth. Assuming both Home and Foreign have 30 workers. All other assumptions are based on the Ricardian Model. Answer the following questions:

1.Which country has absolute advantage, why

2.Which country has comparative advantage, why

3.What's the relative prices of wheat in Home and Foreign, respectively.

4.Draw the PPFs for Home and Foreign.

5.What's the trading pattern between Home and Foreign: which country focuses on producing cloth and which country focuses on producing wheat.

6.Assuming the trade equilibrium price: Pw/Pc=2.5. Then show that the real wage of labors in both countries can increase, and that the real wage of Foreign labor is less than that of Home labor

7.Assuming the trade equilibrium price: Pw/Pc=2.5. Then use figure to show that both countries can get higher utilities than those achieved without international trade.