The following table gives the number of labor hours required to produce one (1) unit of each good (Wine and cloth) in France and taly: Wine | Cloth France | 7 3 Italy 5 4 Assume that France has a total of 60 hours of labor and ltaly has a total of 40 hours available. a. Tm oo o0 o o T o 3 o Write the equation for France's production possibilities frontiers. Graph France's PPF. Label the horizontal and vertical intercepts of France's PPF. What is the slope of the PPF? Place wine on the horizontal axis. Write the equation for Italy's production possibilities frontier. Graph Italy's PPF. Label the horizontal and vertical intercepts of ltaly's PPF. What is the slope of the PPF? Place wine on the horizontal axis. What is the autarky relative price of wine in France? What is the autarky relative price of wine in ltaly? What country has an absolute advantage in producing wine? Explain the reason for your answer. What country has an absolute advantage in producing cloth? Explain the reason for your answer. Which country has the lower opportunity cost of producing wine? Justify your answer. Which country has the lower opportunity cost of producing cloth? Justify your answer. Suppose ltaly and France trade with each other. Which country has a comparative advantage in wine? Which country has a comparative advantage in cloth? Provide reasons for your answers. What would happen to world production of both wine and cloth if France specialized in producing cloth and ltaly specialized in producing wine? . What would happen to world production of both wine and cloth if France specialized in producing wine and ltaly specialized in producing cloth? Suppose that after trade is opened, the terms of trade is 2; that is (;i = 2) where B, is the price of wine and F. is the price of cloth. = e Suppose France consumes 10 units of cloth. How much wine does it consume? Given your answer to (part n), how much cloth does France export? Suppose ltaly exports 5 units of wine after trade is opened. How much wine does it consume? F Calculate the factoral terms of trade from France's point of view, thatis, {%] the wage in France relative to the wage in ltaly. Calculate the real wage in terms of both goods in both France and ltaly following the opening of trade. What happens to real wages with trade compared to autarky? Suppose France experiences a technological improvement in the production of wine. How would this affect France's PPF? How would it affect the pattern of trade