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In: Economics

Determine whether each of the following statements is TRUE or FALSE. Justify all the answers in...

Determine whether each of the following statements is TRUE or FALSE. Justify all the answers in few sentences.

1. In the Ricardian model with 2 goods (Wine and Cheese) and 2 countries (Home and Foreign) and (except otherwise noted) identical preferences between countries:

(a) If both countries have the same number of workers and Home has absolute advantages in both goods then Home must have a higher wage.

(b) The Home country is never made worse off by productivity growth at Foreign.

(c) Under free trade, if both countries are incompletely specialized then an increase in the number of workers at Home increases the utility of each worker in Foreign.

(d) Suppose that people at Home only eat cheese while people at Foreign only drink wine. Then, if both countries trade in positive quantities, the price of wine in terms of cheese at home must be cheaper under autarky than under trade.

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