Question: please explain Question 6 Consider the Ricardian model. There are two countries: Home and Foreign. Both can produce two goods: chocolates and beers. Home has

please explain

Question 6 Consider the Ricardian model. There are two countries: Home and Foreign. Both can produce two goods: chocolates and beers. Home has 100 units of labor available. Home's unit labor requirement in chocolate production is 1, while in beer production it is 4. Foreign has a labor force of 200. Foreign's unit labor requirement in chocolate production is 2, while in beer production it is 10. Now suppose world relative demand takes the following form: Demand for beers _ price of chocolates demand for chocolates _ price of beer (1) Graph Home country's production possibility frontier. (Put quantity of chocolates on the xaxis) (2) W'hat's the opportunity cost of chocolates in terms of beers in Home and Foreign country? (3) In the absence of trade, what would the prices of chocolate in terms of beers be in Home country and Foreign country? (4) Construct the world relative supply curve. Put the relative quantity of chocolate on the xaxis, and the relative price of chocolate on the yaxis. (5) What is the equilibrium relative price of chocolate after trade? What's the equilibrium wage in Home Country relative to the wage in Foreign after trade? (6) Describe the pattern of trade. (7) Does Home country gain from trade? What about Foreign? Show the gains from trade if there are any (one method is enough)

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