Need help with economics Consider the following model of trade between Iceland and Finland. There are two goods:Fish and Wheat. The only factor of production is labor. Each Icelandic worker can produce 1unit of fish or 2 unit of wheat per unit of time, while each Finnish worker can produce 2 unitsof fish or 6 units of wheat per unit of time. There are 8 million workers in Iceland and 3million in Finland. The relative demand in each country is given byRD:QFQw=PwPFNote that since both countries have the same relative demand, this is alsothe world's relative demand.a. Which country has an absolute advantage in fish? In wheat? Which country has acomparative advantage in fish? In wheat?b. Find the relative price of fish in both countries when there is no trade (each country isisolated). Express the relative price as the price of fish divided by the price of wheat. Drawthe typical worker's budget line in both countries.c. Graph the relative demand in a diagram with the relative price of fish (PF/PW) on thevertical axis and the relative quantity of fish (QF/QW) on the horizontal axis.

Answered: Consider the following model of trade…

Micro Economics For Today

10th Edition

ISBN:9781337613064

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter15: International Trade And Finance

Section: Chapter Questions

Problem 5SQP

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