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QUESTION 3. Consider the Ricardian model with two countries: Home and Foreign, and three goods: GA, GB and GC. The two countries can freely trade
QUESTION 3. Consider the Ricardian model with two countries: Home and Foreign, and three goods: GA, GB and GC. The two countries can freely trade with each other. Labor is the only productive input, and has constant marginal productivity. The number of workers required to produce one unit of each good is given in the following table: Foreign There are no transportation costs or other barriers to trade. (a) Rank the goods in increasing order of Home's comparative advantage. (b) If the wage rate in Home is 1.5 times the wage in Foreign, which goods will each country specialize in
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