Add suitable indifference curves to the diagram and show how much will be produced and consumed in each country in autarky equilibrium

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Problem 3 Ricardian model (8 Points) ........ Suppose there are two countries A and B that produce X and Y at constant returns to scale where the only production factor is labor. Total labor force amounts to LA = LB = 1000 in both countries. The following table depicts the amount of labor needed to produce one unit of each good in the two countries: X Y A 5/3 2 B 2 2 Suppose all consumers have the same preferences, and, they view both goods as perfect complements s. t. U(X, Y ) = min(X, Y )

(a) Draw the production possibility frontier for each country. To do so, consider how much each country can produce of only A, or B only.

(b) Add suitable indifference curves to the diagram and show how much will be produced and consumed in each country in autarky equilibrium. (Bonus,if you can show graphically and analytically.)

(c) Which country has a comparative advantage in which good ?

(d) Draw the world production possibility frontier. (To do so, consider how much will be produced in the world, i

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