Clothes
Food

USA
3.6
7

UK
6
2.4

USA: 72 workers
Brazil: 144 workers
(a) What would be the autarky relative price of clothes in each country? (Assuming
that in autarky conditions both products will be produced in both countries)
(b) Which good, if any, does USA have a comparative advantage in?
(c) Which good, if any, does USA have an absolute advantage in?
(d) Graph the production possibilities frontier of USA, with clothes on the X axis
(e) Graph the world supply of Clothes
(f) Suppose the level of demand for Clothes leads to both countries producing
Clothes
(i)
Draw a demand curve on the supply curve that would result in this
outcome
(ii)
What is the relative price of a piece of clothing?
(iii)
What is the relative wage of USA workers vs. UK workers
(iv)What is the real wage in USA in terms of clothes?
(v)
What is the real wage in USA in terms of food?
(vi)
Which country has gained from trade?