Question: Consider the Ricardian model with two countries, Home and Foreign, and two goods, X and Y. If Foreign workers have a higher real wage than
Consider the Ricardian model with two countries, Home and Foreign, and two goods, X and Y. If Foreign workers have a higher real wage than Home workers and Home country has a comparative advantage in good X, we can conclude that:
- (a)Foreign country has absolute disadvantage in good Y.
- (b)Home country has absolute disadvantage in good X.
- (c)Foreign country cannot benefit from trade with Home country.
- (d)If trade is allowed, in Foreign country, those labours that are employed in the production of good X will lose from trade whereas the ones employed in the production of good Y will gain from trade.
Explain your answer clearly.
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