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Question: consider the following ricardian model mpl labor supply pens pencils...

Question details

Consider the following Ricardian model.

MPL                           Labor Supply

Pens           Pencils

       France         1/10              1/15                     90

       Germany     1/12              1/20                     120

Answer the following questions and show your steps. For the T/F questions, please explain why they are T/F.

assume that under free trade, the relative price of pens equals 0.65; i.e. PpensT/PpencilsT = 0.65.

11. Draw the CPF for France, and label your picture. You can draw a new picture, or in the same picture as 1 above. What is the slope of CPF? (4 points)

12. Under free trade, the relative wage of France to Germany (wFRANCE/wGERMANY) equals 16/13.

13. Under free trade, the real wage for pencils in Germany equals 13/400.

14. Under free trade, the real wage for pencils in France equals 1/15.

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