. Under Ricardian world, if the relative price of corn is higher than the opportunity costs ofcorn, which good(s) does China produce?A) Corn onlyB) Wheat onlyC) Both corn and wheatD) We don’t know.

2. Assume Ricardian world. With no trade, if a country consumes two goods, it implies thatA) the price of two goods are the same.B) the relative price of one good is the same as the opportunity costs of that good.C) the relative price of one good is the same as the opportunity costs of the other good.D) A good which is consumed more is cheaper than the other good.

Consider China and US in a Ricardian world. Each country produces two goods, corn andwheat. Each country has 600 units of labour hour available. The table of unit labour costs forproduction of each good in each country is below:Corn WheatChina 6 4US 2 2a. 1) What is the marginal product of labour in corn in China?2) What is the opportunity cost of producing corn in China?b. 1) What is the marginal product of labour in wheat in China?2) What is the opportunity cost of producing wheat in China?c. 1) What is the marginal product of labour in corn in US?2) What is the opportunity cost of producing corn in US?d. 1) What is the marginal product of labour in wheat in US?2) What is the opportunity cost of producing wheat in US?e. Which country has absolute advantage in corn?f. Which country has absolute advantage in wheat?g. Which country has comparative advantage in corn?h. Which country has comparative advantage in wheat?

The wheat market in one particular country has a large number of sellers and buyers, and there is no difference in the products sold by each seller. As a result, prices are determined by theMultiple Choiceforces of supply and demand.government.absence of competition.businesses that sell the corn.

Consider China and US in a Ricardian world. Each country produces two goods, corn andwheat. Each country has 600 units of labour hour available. The table of unit labour costs forproduction of each good in each country is below:Corn WheatChina 6 4US 2 2a. Derive China’s production possibility frontier (PPF). (Write down an equation of China’sPPF)b. Draw China’s PPF. Have the quantity of corn on the horizontal axis.(Derive US’sproduction possibility frontier (PPF). (Write down an equation of US’s PPF)c. Draw US’s PPF.Have the quantity of corn on the horizontal axis.d. Derive US’s production possibility frontier (PPF). (Write down an equation of China’sPPF)e. What is the slope of PPF of China? Explain your answer.f. What is the slope of PPF of US? Explain your answer.g. In the absence of trade, what would be the prices of corn in terms of wheat in China?

2. The Ricardian theory of comparative advantage states that a country has a comparativeadvantage in rice ifA) unit labor requirement of rice is higher in that country compared to unit labor requirement ofrice in other countryB) unit labor requirement of rice is lower in that country compared to unit labor requirement ofrice in other countryC) wage rates in that country are highD) both b and cE) None of the above