Table 1 given below shows the number of labor hours required to produce 1 bushel of wheat and 1 ton of gold in South Africa and India.

Table 1

Labor hours to make:	In South Africa	In India
1 bushel of wheat	5	4
1 bar of gold	20	200

Make several Ricardian assumptions: these are the only two commodities, the productivity of labor is constant for each product no matter how much is produced, and competition prevails in all markets.

a. Compute the productivity of each country for each product. Which country has an absolute advantage at producing wheat? Which country has an absolute advantage at producing gold? (8 points)

b. Compute the relative prices of each product in each country without trade. Which country has a comparative advantage at producing wheat? Which country has a comparative advantage at producing gold?(8 points)

c. According to the theory of comparative advantage, which country would export wheat? Which country would export gold? (5 points)

d. If India and South Africa are allowed to trade, between what prices would the international relative price of gold be?Between what prices would the international relative price of wheat be? (7 points)

e. Assume that no trade is allowed between the countries and that South Africa has 100,000,000 hours of labor available to use. If people want to consume wheat and gold in equal amounts, how much wheat and how much gold would South Africa produce?

f. Plot the production possibility curve for South Africa if it has 100,000,000 hours of labor available. Label the economy's production of wheat and gold from part e point A on the PPC.