Question 2: Ricardian Model of Trade (total 18 points) In Table 2, you observe unit labor requirements for producing Cloth and Widgets in Home and Foreign. Table 2: UNIT LABOR REQUIREMENTS Cloth Widgets 3 1 2 Home Foreign 2 (a) What is the opportunity cost of Cloth in terms of Widgets in Home and Foreign? (2) points) (b) What is Home's comparative advantage? What about Foreign's ? (2 points) (c) Home has 600 workers. Foreign has 400 workers. Suppose countries can trade, derive world relative supply. Plot it, clearly labeling the axis and all relevant points. (Hint: use Pc/Pw as your Y variable) (4 points) (d) The relative demand is as follows: Pc = 2- Pw 4 Qc + Qc 3 Qw + Qw where* denotes values in Foreign. Graph the demand curve together with the supply curve from (c) and find the equilibrium world relative production and price. (6 points) (e) What will Home and Foreign import and export? Show the welfare gains from trade in Home. (4 points)