There are two countries, Nigeria and India, and two goods, oil and diamonds. There is one...

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There are two countries, Nigeria and India, and two goods, oil and diamonds. There is one factor of production, labor, that is immobile across sectors. Both countries have 100 (million) workers apiece. The amount of each good produced by a single worker in each sector and country are given in the following table: Nigeria India Oil AN = 2 A = 1 Diamonds A = 1 A = 1 Preferences in both countries are given by the utility function U(O,D) = 0¹/2D¹/2 Initially both countries are in autarky. Each country allocates half of its labor to producing oil and half to diamonds in autarky. 1. Suppose the countries open up to trade. Compute the equilibrium price ratio p = free trade. 2. Who gains from trade? Does anyone lose from trade? PO under PD There are two countries, Nigeria and India, and two goods, oil and diamonds. There is one factor of production, labor, that is immobile across sectors. Both countries have 100 (million) workers apiece. The amount of each good produced by a single worker in each sector and country are given in the following table: Nigeria India Oil AN = 2 A = 1 Diamonds A = 1 A = 1 Preferences in both countries are given by the utility function U(O,D) = 0¹/2D¹/2 Initially both countries are in autarky. Each country allocates half of its labor to producing oil and half to diamonds in autarky. 1. Suppose the countries open up to trade. Compute the equilibrium price ratio p = free trade. 2. Who gains from trade? Does anyone lose from trade? PO under PD

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Lets analyze the situation 1 Suppose the countries open up to trade Compute the equilibrium price ratio p 20 under PD free trade To find the equilibrium price ratio we can use the concept of comparati... View the full answer