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Consider two countries (Home and Foreign) that produce two goods: wine (W) and cheese (C)

Economics

Consider two countries (Home and Foreign) that produce two goods: wine (W) and cheese (C). All assumptions of the Ricardian model hold. The two countries are engaged in free trade. Use the notation from the class, for example: Pw is the price of wine; a lc is Foreign's unit labor requirement for wine; etc. Use any appropriate figures to argue the following. 1. Show that if the unit labor requirement ratios are different between the two countries (that is, if alc + cic), then at least one country must completely specialize in one of the goods. ALW ALW Hints: draw typical PPFs for each country; what does ALC aic # imply for the slopes of the PPFs? ALW alw If it helps you, you can even assume that mic

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