Suppose L = 10, L* = 20, a_c = 2, a_w = 4, a_c* = 8, a_w* = 4. Also assume all individuals like to consume both goods with equal amount.

A) Compute P_c (while setting P_w = 1) in autarky (closed) economy at Home.

• 2
• 1
• 1/2
• 3/2

B) Compute Quantity demanded or quantity produced in autarky (closed) economy at Home.

• 10.6 cheese, 10/6 wine
• 2 cheese, 3 wine
• 3 cheese, 2 wine
• 1 cheese, 1 wine

C) Compute GDP in autarky (closed) economy at Home.

• 5
• 15/6
• 10
• 30

D) Compute wage for cheese and wine production in autarky (closed) economy at Home.

• Cheese: 1, Wine: 1
• Cheese 1/4, Wine 1/4
• Cheese 1, Wine 1/3
• Cheese 1/3, Wine 1

E) In the open economy, which country produces which good and how much?

• home produces 10/3 wine, foreign produces 30/9 cheese
• home produces 10/3 wine, foreign produces 5 cheese
• home produces 5 wine, foreign produces 30/9 cheese
• home produces 5 cheese foreign produces 5 Wine

F) Suppose the world price ratio = 1 in the open economy (Set P_c = P_w = 1). Compute GDP and wage in Home in open economy.

• GDP: 5, Wage: 1
• GDP: 3, Wage: 1
• GDP: 3, Wage: 1/2
• GDP: 5, Wage: 1/2