1. You just overheard your friend say the following: "Poor countries like Malawi have no absolute advantages. They have poor soil; low investments in formal education, hence low-skill workers; no capital; and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade." How would you respond?

2. Consider two countries: South Korea and Taiwan. Taiwan can produce one million mobile phones per day at the cost of $10 per phone and South Korea can produce 50 million mobile phones at $5 per phone. Assume these phones are the same type quality and there is only one price. What is the minimum price at which both countries will engage in trade?