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Unformatted text preview: orld relative demand for cloth is downward sloping. If the world relative price of
Cloth, PC with trade is 1:25; explain whether each country completely specializes
in the production of a single good. If the population of the Home country were
to increase to L = 1000 explain what would happen to the World relative price
of Cloth, PF . (5 marks) 8 (d) Suppose that in addition to Cloth (C ) and Food (F ); there are three additional
goods (A; B and D): The unit labour requirements for the production of each
good in Home and Foreign are presented in the following table:
unit labour requirements
10 10 2 6
The equilibrium relative wage is w = 1 . Which goods are produced and exported
by the Home country? Find the relative prices PC and PB . (6 marks)
PF 9 PART C: Answer this question. This question is worth 20 marks.
1. Read the following excerpt from an article that recently appeared in the Globe and
Mail (October 21, 2009). Pirates wreak havoc on trade lanes
Number of incidents have already topped total number of attacks in 2008, new report says
Globe and Mail Update Published on Wednesday, Oct. 21, 2009 12:35PM EDT Last...
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- Fall '10