Use the appropriate graphs in the H-O model to show and describe in detail how countries benefit from international trade.

(3). Assume there are two countries, Canada and Ghana, producing two goods, "A" and "B". Domestic technology allows Canada to produce a unit of good "A" using 4 man-hours and a unit of Good "B" using 1 man-hour. The corresponding figures for Ghana, the foreign country, are 12 and 2 respectively. Finally, labour force for Canada and Ghana are 480 and 120 respectively.

a.Carefully graph the production possibility frontiers for each country (show all calculations).

b.What are the opportunity costs of each good in each country? Which country has the comparative advantage in good "A"? good "B"?

c.Use production and consumption possibility curves and a carefully chosen world price to demonstrate that both countries will gain if they trade at any world relative price within the range of opportunity costs of each good.

d.Why do we get complete specialization when countries decide to trade? Is the reason specific to this model?