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The Ricardian Model: Trade Pattern Home has 1,200 units of labor available. It can produce two goods, apples and bananas.The unit labor requirement in apple
The Ricardian Model: Trade Pattern Home has 1,200 units of labor available. It can produce two goods, apples and bananas.The unit labor requirement in apple production is 3, while in banana production it is 2. Foreign has a labor force of 800. Foreign's unit labor requirement in apple production is 5, while in banana production it is 1. a. What is the opportunity cost of apples in terms of bananas in Home? b. What is the opportunity cost of apples in terms bananas in Foreign? c. In the absence of trade, what would the price of apples in terms of bananas be?VVhy? d. After trade, which price would be possible? 2 or 6? e. Describe the pattern of trade. f. Using the price you have chosen in question d, show that both Home and Foreign gain from trade
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