Question: Consider the Ricardian model with two countries ( Canada and the United States ) and two goods ( apples a and oranges o ) .
Consider the Ricardian model with two countries Canada and the United States and two goods apples a and oranges Assume that unit labor requirements are as follows where is the unit labor requirement for good in country :
Assume consumer preferences in both countries are given by with is the relative price of apples to oranges. Suppose that we are in free trade and that the relative demand for Apples increases but does not change.
How many of the following five statements are inconsistent with the information above?
The United States initially produces both apples and oranges.
Initially, Canada produces only oranges and the United States produces only apples.
Neither country gains from the change in relative demand.
in the initial equilibirum
in the initial equilibrium
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