Cheese must the horizontal axis and beer must the vertical axis

3Suppose now that we have trade between the countries and the world price is 1 cheese for 1 beer. For each country draw in the budget constraint. For each country label the production point on the diagram. (20 marks)

4Denote the world prices in dollars as P and B P respectively. Denote the C

6For both countries calculate the hourly wage rate (with international trade). (5 marks)

7Discuss why governments persist with protectionist policies. In your
discussion include the medium voter theorem (a maximum of 500 words). (40 marks)