Numerical AssignmentFor credit, clearly show your calculations and state the assumptions you made....

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Numerical AssignmentFor 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    4Let initial labor endowments in the two countries be        U.S.    Mexico    Labo    80    40Suppose also that consumers in both countries insist on consuming equal number of units of both goods regardless of price.a) Determine the autarky equiliium quantities of both goods and the autarky relative prices of cloth in terms of wheat in the U.S. and Mexico.) Draw the world relative demand and supply curves.    c) Determine the free trade equiliium quantities of both goods produced and consumed in both countries; the free trade quantities of trade; and the free trade equiliium price.    d) How will the patterns of production, consumption, and trade be affected if the labor endowment of Mexico grows to 160?

Komalavalli · Accepted Answer

a)
Autarky quantity equilibrium of both goods is 6 units and the relative price of cloth in terms of wheat in the US is 2/4 =1/2, the relative price of cloth in terms of wheat in the US is 4/2 =2.

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...

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