Instructions: This is an individual assignment. Please read Chapter 2 Trade and Technology: The Ricardian Model (p. 29 – 48; 53 – 54). Type up your answers to the following questions:How do you determine a pre-trade equilibrium using PPF and indifference curves?How do you determine a countrys absolute advantage and comparative advantage?How do you use pre-trade relative prices or opportunity costs to determine patterns of trade?Under trade, the equilibrium relative price of a traded good must stay within which interval in order for trade to be mutually beneficial?What is the meaning of an international trade equilibrium?How are gains from trade reflected in a graph that involves PPF and indifference curves?How does trade affect a worker’s real wage?What is the meaning of terms of trade? Is it the relative price of a country’s exports or imports? Why?Two countries: US and Mexico. Two goods: Airplane and car. A US worker’s MPL is 20 times higher than a Mexican worker in making an airplane. A US worker’s MPL is 5 times higher than a Mexican worker in making a car. Which country has absolute advantage in making cars and why? Which country has comparative advantage in making cars and why?
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