Numerical Assignment For credit, clearly show your calculations and state the assumptions you made. (Total 30 points) 1. Let unit labor requirements for producing wheat and cloth in the U.S. and...

Short numerical trade assignment


Numerical Assignment For credit, clearly show your calculations and state the assumptions you made. (Total 30 points) 1. Let unit labor requirements for producing wheat and cloth in the U.S. and Mexico be U.S. Mexico Wheat 4 2 Cloth 2 4 Let initial labor endowments in the two countries be U.S. Mexico Labor 80 40 Suppose also that consumers in both countries insist on consuming equal number of units of both goods regardless of price. a) Determine the autarky equilibrium quantities of both goods and the autarky relative prices of cloth in terms of wheat in the U.S. and Mexico. b) Draw the world relative demand and supply curves. c) Determine the free trade equilibrium quantities of both goods produced and consumed in both countries; the free trade quantities of trade; and the free trade equilibrium price. d) How will the patterns of production, consumption, and trade be affected if the labor endowment of Mexico grows to 160?