What is the opportunity cost of computers in terms of shoes at home? Problem 3. (Ricardian model) [week 2]. Two countries, Alia and Palia are closed to international trade. Alia has 1800 units of labor available, and Palia has 900 units. Both countries can produce two goods, skis and snowboards. Alia's unit labor requirement in skis production is 3, while in snowboards production is 2. Palia's unit labor requirement in skis production is 5, while in snowboards production it is 1. a) Graph Alia and Palia's production possibility frontier. b) Compute Alia and Palia's opportunity cost of skis in terms of snowboards. Explain. c) In the absence of trade, compute the price of skis in terms of snowboards in Alia and in Palia. Assume that consumers in each country like to consume both goods. Explain. d) Assume now that the two countries open to trade with each other. Which country has comparative advantage in skis? And in snowboards? Explain. e) Construct the world relative supply curve. Show it in a graph. Problem 4 (Heckscher-Ohlin model) [weeks 3 and 4] Two countries, Home and Foreign, both able to produce two goods: cloth and tablet computers. The production of both goods uses capital and labor in fixed proportions, with the tablets industry using more capital per worker than the cloth industry. The units of each input needed to produce one unit output are given by: cloth 1 2 tablets 2 1 Both countries have 150 units of capital available for production, but the Home country has 100 units of labor whereas the Foreign country has 200. Consumers like to consume both goods and have the same