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Question: assume that home and foreign produce two goods tvs and...

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Assume that Home and Foreign produce two goods, TVs and cars, and use the information below to answer the following questions.

No-Trade Equilibrium

Home

Foreign

wageTV= 12

wageC= ?

wage*TV = ?

wage*C= 6

aLTV = 0.5

aLC = ?

aLTV * = ?

aLC* = 1

PTV = ?

PC = 4

PTV = 3

PC = ?

a. What is the unit labor requirement for cars in Home?

b. What is the no-trade relative price of TVs in Home?

c. What is the unit labor requirement for TVs in Foreign?

d. What is the no-trade relative price of TVs in Foreign?

e. Suppose that the free trade equilibrium relative price of TVs, is PTV/ PC= 1. Which good will Home export?

f. Which good will Foreign export?

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