Suppose that two countries called America and China conform to the assumptions of the Ricardian model.
The unit labor coefficients for the two countries for producing steel (S) and airplanes (A) are: USLS= 10L/S USLA= 10L/ACLS= 20L/S CLA= 5L/ABoth countries have the same number of workers.
a.Based on this information, what is the pattern of comparative advantage?
b.Suppose the wage in the US was $5/L and the wage in China was $5/L. Will both countries be able to export the good of comparative advantage?
c.Suppose the wage in the US was $5/L and the wage in China was $1/L. Will both countries be able to export the good of comparative advantage? Explain.
