QUESTION 5 There are two countries: A and B. Here, we consider the trade equilibrium with transportation costs. There are four homogeneous goods and one input (labor). Unit labor requirements are given in the following table. In addition, the free-trade wage rate in A is $1, and that in B is $2. Finally, we assume it costs $2 to transport goods from the other country. Which product(s) will not be traded between the two countries? Units of labor required per unit of output A 9 7 5 3 Textile Fish Soybean Com B 2 3 3 4

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QUESTION 5
There are two countries: A and B. Here, we consider the trade equilibrium with transportation costs. There are four homogeneous goods
and one input (labor). Unit labor requirements are given in the following table. In addition, the free-trade wage rate in A is $1, and that in B
is $2. Finally, we assume it costs $2 to transport goods from the other country. Which product(s) will not be traded between the two
countries?
Textile
Fish
Units of labor required per unit of output
A
Soybean
Corn
Textile, fish, soybean, and corn
Fish
O Fish and soybean
O Soybean
975
5
3
B
2
3
3
4
Transcribed Image Text:QUESTION 5 There are two countries: A and B. Here, we consider the trade equilibrium with transportation costs. There are four homogeneous goods and one input (labor). Unit labor requirements are given in the following table. In addition, the free-trade wage rate in A is $1, and that in B is $2. Finally, we assume it costs $2 to transport goods from the other country. Which product(s) will not be traded between the two countries? Textile Fish Units of labor required per unit of output A Soybean Corn Textile, fish, soybean, and corn Fish O Fish and soybean O Soybean 975 5 3 B 2 3 3 4
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