A. Relative Supply Curve. Given the typical Ricardian single input, 2 output-2 country model and the following information concerning the amount of labor available and the relevant unit labor requirements for the production of cheese and wine for both countries, answer the questions below. Labor: L-2400 and L=3600 For Cheese a 4-6 For Wine: 8, 4-6 (A) Putting wine on the vertical axis and cheese on the horizontal, gruph the home and foreign countries production possibilities frontier. Also make sure to give the intercepts of each. (6 points). (A.ii) Derive the world relative supply of cheese to wine. On the vertical axis you should have PP, and on the horizontal, the quantity of cheese over the quantity of wine (+)(Q+Q) (6 points) (B) Without knowing demand, what is the range of possible equilibrium prices, PP, under trade? (2 points) (Biv) Who gains from trade and who doesn't when compared to the prices each country faced before trade? Explain (3 points).
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