This problem is based on the Ricardian Model. Assume that 2 countries, Gryffindor and Slytherin, use...

 

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This problem is based on the Ricardian Model. Assume that 2 countries, Gryffindor and Slytherin, use troll labor to produce 2 goods, swords and brooms. (a) In Gryffindor, 1 troll can produce 2 swords or 4 brooms, while in Slytherin the production of 1 sword requires 5 trolls and the production of 1 broom requires 2 trolls. Assume that there are 100 trolls in each country. Draw a PPF for each country. (b) Which country has a comparative advantage in swords and why? (c) Suppose that in the trade equilibrium Ps/PB = 2.3. Which good will each country export? (d) For each country, calculate the real wage in terms of swords and in terms of brooms. (e) For each country, compare the values you obtained in part (d) with the real wage in terms of either good in the no-trade equilibrium. Do trolls in each country gain from trade? (f) How much will the trolls of each country consume under autarky and if there is trade? This problem is based on the Ricardian Model. Assume that 2 countries, Gryffindor and Slytherin, use troll labor to produce 2 goods, swords and brooms. (a) In Gryffindor, 1 troll can produce 2 swords or 4 brooms, while in Slytherin the production of 1 sword requires 5 trolls and the production of 1 broom requires 2 trolls. Assume that there are 100 trolls in each country. Draw a PPF for each country. (b) Which country has a comparative advantage in swords and why? (c) Suppose that in the trade equilibrium Ps/PB = 2.3. Which good will each country export? (d) For each country, calculate the real wage in terms of swords and in terms of brooms. (e) For each country, compare the values you obtained in part (d) with the real wage in terms of either good in the no-trade equilibrium. Do trolls in each country gain from trade? (f) How much will the trolls of each country consume under autarky and if there is trade?