- Country A has 1200 units of labor available. It can produce two goods, apples and bananas. The unit labor requirement in apple production is 3, while in banana production it is 2. (The unit labor requirement of a good is the amount of labor required to produce one unit of that good.) There is another country, country B, with a labor force of 800. Bs unit labor requirement in apple production is 5, while in banana production it is 1. Suppose people in both countries have the same preferences so that, for each country, the following holds: quantity demanded for apples/quantity demanded for bananas = price of bananas/price of apples. Find out the prices of the goods over which they are exchanged. (Hint: the prices are such that, for each good, the total demand by both countries is equal to the total supply by both countries.)
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