Question

1. Consider the following Classical (Ricardian) scenario where the content of each cell represents the labour requirements for that product: hour/pair, or labour/ gallon.

	Shoes (pair)	Wine (gallon)
India (I)	9 hr/pr	18 hr/gal
Australia (A)	10 hr/pr	4 hr/gal

1. Sketch India’s Production Possibility Frontier assuming that its labour force consists of 9000 units of labour hours and pinpoint its post-trade equilibrium production levels of shoes and wine.
2. Determine the post- trade wage ratio (W_I/W_A).

Answer 1