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Let's analyze a Ricardian model with a continuum of goods. There are two countries (H and F), with endowments of labor L and L. Suppose that A(z)=a(zi)a(zi), with A(z) decreasing in z, represents the goods in decreasing order of comparative advantage of country H. 1. Show how the assumption on technology, for a given relative wage (=w2w), allows determining the specialization in production between two countries. 2. Assume now the presence of an iceberg transport cost t. Show that this model generates non-traded goods in this case. Let's analyze a Ricardian model with a continuum of goods. There are two countries (H and F), with endowments of labor L and L. Suppose that A(z)=a(zi)a(zi), with A(z) decreasing in z, represents the goods in decreasing order of comparative advantage of country H. 1. Show how the assumption on technology, for a given relative wage (=w2w), allows determining the specialization in production between two countries. 2. Assume now the presence of an iceberg transport cost t. Show that this model generates non-traded goods in this case