Show necessary steps and/or reasonings. No credits will be given to answers only.
1. The following table shows the amount of inputs Country X and Country Y need to produce one unit of output. Inputs per unit of rice Input per unit of cloth Country X 75 100 Country Y 50 50
a. Which country has the absolute advantage in rice? In cloth?
b. Which country has the comparative advantage in rice? In cloth?
c. In the absence of international trade, what would be the price ratio between rice and cloth for Country X?
d. If the countries trade freely, what would be the limits (or range) of equilibrium price ratios for the world price?
e. If the countries trade freely, what product will Country X export? Import?