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In The No-Trade Equilibrium Stormlands: WageL = 24 WageW = ? MPLL = 4 MPLW = ? PL = ? PW = 4
Reach: Wage*L = ? Wage*W = 6 MPL*L = ? MPL*W = 1 P*L = 3 P*W = ?
(a) Which country has a comparative advantage in wheat and why?
(b) Suppose that in the trade equilibrium PL/PW = 1.2. Which good which each country export?
(c) For each country, calculate the real wage in terms of lumber and in terms of wheat.
(d) For each country, compare the values you obtained in part (d) with the real wage in terms of either good in the no-trade equilibrium. Do White Walkers in each country gain from trade?
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The consumer's utility function is u(x1,x2) = (x1) (x2)^2 (a) Graph his budget constraint for p1 = 3, p2 = 2 and M = 900, and write down the equation for his budget line. (b)
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