With due acknowledgment to David Ricardo, suppose the United Kingdom (UK) and Portugal (P) both produce wine and textiles, production of both goods only requiring the input of labor. The marginal products of labor, a and , are described in the following table: Marginal Products of Labor UK Wine aUK = 150 Textiles BUK = 200 Portugal aP = 250 BP = 150 (1) Given constant returns to scale in the production of both wine and textiles, and each country having 5 workers, draw the production frontiers of the UK and Portugal. (Put wine on the vertical axis, textiles on the horizontal axis) (ii) In terms of the diagram, what measures absolute advantage and comparative advantage? Derive explicitly the slopes of each country's production frontiers. (iii) Why do the autarky relative price lines for each country coincide with their production frontiers? How does this affect the derivation of the excess demand curve for wine in Portugal? (iv) Illustrate free trade relative prices resulting in the UK specializing in textiles and Portugal specializing in wine. Assuming a competitive labor market, explain the intuition for Portugal specializing in wine production. (v) Using the excess demand curves for textiles, describe what happens to the UK's terms of trade if their labor force doubles.