1-Suppose an hours labor produces 4 kg of rice and 8 meter of cloth in Nepal, and 2 kg and 8 meter in Bangladesh. Using opportunity costs, explain which country will export cloth and which will export rice in trade? If you think Nepal and Bangladesh should trae rice and cloth, what principle you borrowed from Ricardo did you use? Discuss. 2-A country produces two crops – barley and wheat. Given the price of barley (Pb) and wheat (Pw), the relationship of labor allocation is shown as MLPb x Pb = MLPw x Pw = w, where MLPb and MLPw are marginal products of labor for the two. Suppose after opening up to trade wheats price increases by 15 percent and barleys price increases by 8 percent; in what percentages (any possible number) the wage increases and how the income distribution changes after opening up to trade?
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