9. Answer ALL parts of this question. Consider a standard Hecksher-Ohlin world, with the following endowment of production factors: Home Foreign Labour 45 20 Capital 15 10 There are two goods: Computers (C), which are capital intensive, and T-shirts (T), which are labour intensive. (a) Based on the table above, what are the expected patterns of trade in this world and why? (b) In this example, who would gain from opening up to free trade and who would lose, and why? (c) Suppose that the relative price of computers is fixed at Pc/PT and there is a sudden increase in the available labour in Home. What will happen to the production possibility frontier and Home's production of Computers and T-shirts. Explain your answer and illustrate with a relevant diagram.

9. Answer ALL parts of this question. Consider a standard Hecksher-Ohlin world, with the following endowment of production factors: Home Foreign Labour 45 20 Capital 15 10 There are two goods: Computers (C), which are capital intensive, and T-shirts (T), which are labour intensive. (a) Based on the table above, what are the expected patterns of trade in this world and why? (b) In this example, who would gain from opening up to free trade and who would lose, and why? (c) Suppose that the relative price of computers is fixed at Pc/PT and there is a sudden increase in the available labour in Home. What will happen to the production possibility frontier and Home's production of Computers and T-shirts. Explain your answer and illustrate with a relevant diagram.

Principles of Macroeconomics (MindTap Course List)

8th Edition

ISBN:9781305971509

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter3: Interdependence And The Gains Rrom Trade

Section: Chapter Questions

Problem 9PA

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