Ricardo Model Assumptions Fulfilled

Labor Input Required and Total Labor Endowment per Unit of Goods in Countries A and B

This table displays the labor hours required to produce machinery and textiles in each country, as

well as the total labor force available in each country.

Draw the consumption possibility area for country B in a closed economy and after free trade,

and use it to explain the benefits of trade. Make sure to accurately display the figures for goods $Y$

and $x$ when drawing the graph $($indicate what the vertical and horizontal axes represent$).$

After free trade, what goods does country A produce and in what quantities?

What are the wage levels in country A and $B$ under free trade equilibrium?

If country A were to produce good $Y$ under free trade, what would the production cost be$?$

What would be the production cost of good $Y$ in country $B$ under free trade?

It can be argued against the claim that B country workers are exploited due to lower wages by

demonstrating that the amount of good $x$ that can be consumed per unit of labor increases after

free trade. What are the amounts of good $x$ that can be consumed per unit of labor in country $B$

under a closed economy and under free trade?

If the price of good $x$ under free trade were not $40$ but $50,$ then:

Discuss the relative wage level in country $A$

Draw and compare the consumption possibility area for country B with the price of good $x$

at $40$ and explain how changes in trade conditions affect the benefits of trade.