Suppose that the relative demand of apples relative to bananas is given by Pa 3 Pb...

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Suppose that the relative demand of apples relative to bananas is given by Pa 3 Pb (la) (2 points) Find Pa and in the free trade equilibrium. Qa Qb Pb (6 points) Find the production of apples and bananas in Home and in Foreign in the free trade equilibrium. (4 points) Find the real wage in Foreign in autarky (no trade) equilibrium and in free trade equilibrium. (4 points) Draw the budget constraint of Foreign's representative worker in autarky equilibrium and the free trade equilibrium. (Put apples on the horizontal axis.) Are Foreign workers better off with free trade? Why or why not? Suppose that the relative demand of apples relative to bananas is given by Pa 3 Pb (la) (2 points) Find Pa and in the free trade equilibrium. Qa Qb Pb (6 points) Find the production of apples and bananas in Home and in Foreign in the free trade equilibrium. (4 points) Find the real wage in Foreign in autarky (no trade) equilibrium and in free trade equilibrium. (4 points) Draw the budget constraint of Foreign's representative worker in autarky equilibrium and the free trade equilibrium. (Put apples on the horizontal axis.) Are Foreign workers better off with free trade? Why or why not?

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Part 1 To find PaPb and QaQb in the free trade equilibrium we need to set the world price of apples equal to the domestic price of apples in both Home and Foreign countries This is because in a free t... View the full answer