There are 2 countries, Home and Foreign, and 2 goods, Wine and Cheese. In each countrythe are 150 workers. But not all workers are the same: some workers are cheese-makers and some workers are wine-makers. Each cheese-maker can produce one pound of cheese and zero bottles of wine, and each wine-maker can produce one bottle of wine and zero pounds of cheese. In the Home country there are 100 cheese-makers and 50 wine-makers, and in the Foreign country there are 50 cheese-makers and 100 wine-makers. The relative demand for Cheese of each individual worker is
RD = Cc/Cw = 1/ (Pc/Pw).
1. Suppose that both countries are closed to international trade, but cheese-makers and wine-makers can trade with one another within each country. What is the price of cheese (in terms
of wine) in each country?2. Are both Cheese-makers and Wine-makers better off under free trade than under internationalautarky in the Home country?