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1. (10 marks) Consider a Heckscher-Ohlin world consisting of two countries, Home (H) and Foreign (F), and two goods, coffee (C) and doughnuts (D). The

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1. (10 marks) Consider a Heckscher-Ohlin world consisting of two countries, Home (H) and Foreign (F), and two goods, coffee (C) and doughnuts (D). The following information is known about Home: the price of coffee is $4, the price of doughnuts is $1, the wage rate is $5, the rental rate is $10, the supply of labour is 12 units and the supply of capital is 14 units. In autarky, Home consumers buy 25 coffees and 100 doughnuts and labour receives half of the coffee revenue. a. (2 marks) Determine how many units of labour work in Home's coffee industry and how many units work in its doughnut industry. b. (2 marks) Determine how many units of capital work in Home's coffee industry and how many units work in its doughnut industry

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