Open Economy Equilibrium (40 points) 0 Based on the unit labor requirements of two economies, draw the line of speciaIization graph including the w US and Mexico. (the line is

Open Economy Equilibrium (40 points) 0 Based on the unit labor requirements of two economies, draw the line of speciaIization graph including the w
US and Mexico. (the line is based on the world relative price :%) And explain the specialization patterns
SB for two countries in each scenario. 0 If the world relative price gig? : 1, draw the gains from trade graph for the US (label before after PPE CPE
SB slope, and indifierence curves; imports and exports) W
0 In the Open Economy, suppose the world relative price $573 = 0.5, solve for the open economy equilibrium for
SB Mexico and the US respectively (your final answer should have the national consumption and production
on FE and SB; since the world relative price is given, you won’t need to state it anymore). Lastly, calculate
the exports from Mexico to the US.

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