Hence kenya and not nigeria has an absolute advantage

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Unformatted text preview: 5/2 L/alw = 100/2 = 50 WINE CHEESE L*/alc* = 200/6 = 33.3 Indifference curve FOREIGN: - Slope = - 1 - price of wine in terms of cheese = 1 - price of cheese in terms of wine = 1 L*/alw* = 200/6 = 33.3 WINE Due to the perfect mobility of labor assumption in the Ricardian Model, wages are equalized between the two sectors. We have: Pc/aic = Pw/aiw and Pc*/aic* = Pw*/aiw*. Therefore, in autarky, we also get Pc/Pw = aic/aiw = 5/2 and Pc*/Pw* = aic*/aiw* = 1. c) Pc/Pw We get (Qc/Qw)w = 2/3 when each country specializes in producing one good (Domestic in wine and foreign in cheese). aic/ aiw= 5/2 (0+200/6)/ (0+100/2) = 2/3 aic*/ aiw* = 6/6 = 1 d) (Qc/Qw)w = (Qc+Qc*)/(Qw+Qw*...
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