Note: same information for questions 12-15, except where oth…
Note: same information for questions 12-15, except where otherwise noted. Two countries, Home and Foreign, can produce five goods: A, B, C, D, E. The table below shows the unit labor requirements for each good in each country, as well as the relative productivity advantage of Home (the ratio of Foreign’s unit labor requirement to Home’s unit labor requirement). The two countries are engaged in free and costless trade. Unit Labor Inputs GOOD HOME FOREIGN (Foreign’s unit labor requirement) / (Home’s unit labor requirement) Good A 2 20 10 Good B 3 18 6 Good C 1 5 5 Good D 3 6 2 Good E 5 2 0.4 For questions 12 and 13, assume that we don’t know the relative wage between the two countries, w/w*, where w is the Home wage and w* is the Foreign wage. In which of the following good(s) does Home have Absolute Advantage in? (HINT: remember that Absolute Advantage is about technical efficiency of producing a good.)