Suppose that the U.S. and Mexico are two Ricardian economies. Both countries can produce only two goods; sweaters and wheat. The characteristics of each economy are summarized in the following table.

a. The price of wheat relative to sweaters in the free-trade equilibrium can be:

a. 1/5

b. 5

c. 4/5

d. 2

b. Given the price we found above, why is the U.S. consumption possibility frontier after trade identical to the Mexican consumption possibility frontier after trade?

c. Given the price we found above, what are the maximum imports the US can buy from Mexico, and the maximum amount of imports Mexico can buy from the US?

\begin{tabular}{|c|c|c|c|} \hline & Labor Productivity in Sweaters & Labor Productivity in Wheat & Endowment of labor \\ \hline United States & 1/5 & 1/2 & 1000 \\ \hline Mexico & 1/3 & 1/3 & 1200 \\ \hline \end{tabular} \begin{tabular}{|c|c|c|c|} \hline & Labor Productivity in Sweaters & Labor Productivity in Wheat & Endowment of labor \\ \hline United States & 1/5 & 1/2 & 1000 \\ \hline Mexico & 1/3 & 1/3 & 1200 \\ \hline \end{tabular}