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1. Assume that Guatemala opens up to coffee trading and that coffee production is labor intensive. Guatemala exports coffee after opening up to trade. (15
1. Assume that Guatemala opens up to coffee trading and that coffee production is labor intensive. Guatemala exports coffee after opening up to trade. (15 pts) a. Under the Heckscher-Ohlin theorem, is Guatemala labor- or capital-abundant? Briefly explain your answer. b. What will be the impact on opening up to trade be on real wages in Guatemala? Briefly explain your answer. c. What will be the impact on opening up to trade be on real rental rates in Guatemala? Briefly explain your answer. d. Under Heckscher-Ohlin assumptions, who you expect to support opening up to coffee trade (labor or capital owners)? e. Explain why in the real world, both labor and capital owners would like support opening up to coffee trade? (Hint: think about Guatemala's GOP and climate.)
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