b) Now, suppose Northland and Southland are free to trade and that in the free-trade equilibrium the relative price of F is (PF/PC)FT=1.5. What is the wage in Northland relative to that in Southland, i.e., wNLD/wSLD? Explain how you calculated this quantity and the economic intuition behind your derivation and result. Consider a simple Ricardian model in which two countries, Northland (NLD) and Southland (SLD),produce two goods, food (F) and clothes (C) using only labor. The unit labor requirement of each type ofproduction is provided in the table below.Unit Labor Requirements LaborEndowmentFoodClothesNorthland2120Southland480

Ricardian has formulated the theory of comparative cost advantage. According to this theory, a…

Answered: Now, suppose Northland and Southland…

ENGR.ECONOMIC ANALYSIS

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Chapter1: Making Economics Decisions

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b) Now, suppose Northland and Southland are free to trade and that in the free-trade equilibrium the relative price of F is (PF/PC)FT=1.5.

What is the wage in Northland relative to that in Southland, i.e., wNLD/wSLD? Explain how you calculated this quantity and the economic intuition behind your derivation and result.

Consider a simple Ricardian model in which two countries, Northland (NLD) and Southland (SLD),
produce two goods, food (F) and clothes (C) using only labor. The unit labor requirement of each type of
production is provided in the table below.
Unit Labor Requirements Labor
Endowment
Food
Clothes
Northland
2
1
20
Southland
4
80

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