Consider the Ricardian model with two countries, Home and Foreign, and two goods, X and Y. If Foreign workers have a higher real wage than Home workers and Home country has a comparative advantage in good X, we can conclude that:(a) Foreign country has absolute disadvantage in good Y.(b) Home country has absolute disadvantage in good X.(c) Foreign country cannot benefit from trade with Home country.(d) If trade is allowed, in Foreign country, those labours that are employed in the production of good X will lose from trade whereas the ones employed in the production of good Y will gain from trade.Explain your answer clearly. Limit your explanation to 200 words.

Comparative advantage means the ability of output or production of goods and services in an economy…

Answered: Consider the Ricardian model with two…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider the Ricardian model with two countries, Home and Foreign, and two goods, X and Y. If Foreign workers have a higher real wage than Home workers and Home country has a comparative advantage in good X, we can conclude that:

(a) Foreign country has absolute disadvantage in good Y.

(b) Home country has absolute disadvantage in good X.

(d) If trade is allowed, in Foreign country, those labours that are employed in the production of good X will lose from trade whereas the ones employed in the production of good Y will gain from trade.

Explain your answer clearly. Limit your explanation to 200 words.

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