Consider 3 countries, A, B and C, all of the same population of 1. Country A can produce 2 apples or 1 banana, country B can produce 1 apple or 1 banana, country C can produce 1 apple or 2 bananas.
(a) Which country has a comparative advantage in producing apples when comparing to all other countries? Which country has a comparative advantage in producing bananas when com- paring to all other countries? What about the last remaining country?
(b) Let's say Country A and Country B participate in international trade, and Country C is staying in autarky. Who benefits from trade? What can you say about possible world prices in this trade?
(c) Let's say country C also joins the international trade, and the world prices of apples and bananas become equal. Who benefits from trade? Who loses from trade compared to being in autarky? Would Country A be against Country C opening for trade? Would country B be against Country C opening for trade?