Suppose that Country A and Country B both produce wine and cheese. Country A has 800 units of available labor, while Country B has 600 units. Prior to trade, Country A consumes 40 pounds of cheese and 8 bottles of wine, and Country B consumes 30 pounds of cheese and 10 bottles of wine.

a. Which country has a comparative advantage in the production of each good? Explain.
b. Determine the production possibilities curve for each country, both graphically and algebraically. (Label the pre-trade production point PT and the post-trade production point P.)
c. Given that 36 pounds of cheese and 9 bottles of wine are traded, label the post-trade consumption point C.
d. Prove that both countries have gained from trade.
e. What is the slope of the price line at which trade occurs?

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CountryA 03 10 50 CountryB 10 30 or per pound cheese Lab Labor per bottle wime