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1. Refer to the following table. Assume there are two workers in Mexico and three workers in the United States. a. Which country has absolute
1. Refer to the following table. Assume there are two workers in Mexico and three workers in the United States. a. Which country has absolute advantage and comparative advantage in producing tequila? In rice? What would the Ricardian model predict for the pattern of trade? Explain. b. Determine the pre-trade relative price of tequila in Mexico and the United States. c. Suppose Mexico consumes 7 bottles of tequila and 5 pounds of rice at the pre-trade equilibrium. Draw the production possibility frontier and the indifference curve of Mexico. What is the quantity of production for tequila and rice in this case? d. Explain how the world relative price achieved from the relative price of Mexico and United State after the trade
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