3. e. In Alpha, is capital or labor better off going from autarky to free trade? Explain youranswer. Question 3Assume a Heckscher-Ohlin model of trade. Alpha (A) and Beta (B) produce two goods pipes(P) and cars (C). Alpha is relatively capital abundant. Let the diagram below represent therelative demand for labor in each industry.Ka. Which industry is capital intensive? Explain your answer.b. Given relative factor endowments which country has a higher w/r in autarky?c. Which country uses more capital-intensive techniques of production in autarky? Doesthis make economic sense?Now assume that countries are free to trade.d. What happens to the techniques of production of Alpha going from autarky to freetrade?

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Answered: Question 3 Assume a Heckscher-Ohlin…

Management, Loose-Leaf Version

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Chapter4: Managing In A Global Environment

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