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Unformatted text preview: n the horizontal (this is not a typo ). 3 4. Explain why the graph of the Relative Demand for labour in the Ricardian model
consists of both downward-sloping and horizontal segments. 4 5. Provide an explanation of why national borders (such as the border between Canada
and the United States) may limit the gains from free-trade. You should discuss this
in the context of the gravity model and use a comparison of trade patterns between
British Columbia and other parts of Canada and between British Columbia and states
in the United States. 5 PART B: Answer this question. This question is worth 20 marks.
1. Consider a world with two goods, Cloth (C ) and Food (F ). There are 2 countries,
Home and Foreign. Unit labour requirements for the production of goods are given in
the following table:
unit labour requirements
Foreign Home has a labour force, L = 600; Foreign has a labour force, L = 320.
(a) Draw the production possibility frontiers for both Home and Foreign. Label the
intercepts and slopes. (4 marks) 6 (b) Draw the world relative supply of Cloth function (RS ). Label the intercepts and
any relevant values along the horizontal axis. (5 marks) 7 (c) W...
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- Fall '10