1. A capital-abundant nation produces a capital-intensive good and a labor-intensive good. This country trades with the rest of the world.

a. Graphically show the equilibrium using a PPF and community indifference curve. b. Now, suppose this nation experiences neutral technological progress in the capital-intensive industry. Show this effect in the same diagram and include the new equilibrium. Assume this country is a small

nation. c. Explain the effect of this growth on exports, imports, the relative price of capital-intensive good, and

wellbeing in this small nation.

2. Use the same information as given in question 1.

a. Graphically show the equilibrium using a PPF and community indifference curve. b. Now, suppose this nation experiences neutral technological progress in the capital-intensive industry.

Show this effect in the same diagram and include the new equilibrium. Assume this country is a large nation and that this growth increased wellbeing in this large nation. c. Explain the effect of this growth on exports, imports, and the relative price of capital-intensive good.

3. Use the same information as given in question 1. a. Graphically show the equilibrium using a PPF and community indifference curve. b. Now, suppose this nation experiences neutral technological progress in the labor-intensive industry. Show this effect in the same diagram and include the new equilibrium. Assume this country is a small

nation. c. Explain the effect of this growth on exports, imports, the relative price of capital-intensive good, and

wellbeing in this small nation.

4. Use the same information as given in question 1.

a. Graphically show the equilibrium using a PPF and community indifference curve. b. Now, suppose this nation experiences neutral technological progress in the labor-intensive industry. Show this effect in the same diagram and include the new equilibrium. Assume this country is a large

nation and that this growth increased wellbeing in this large nation. c. Explain the effect of this growth on exports, imports, and the relative price of capital-intensive good.

5. Use the same information as given in question 1. How would neutral technological progress in the capital- intensive industry affect wellbeing in a large nation? Explain all possible outcomes.