1. There are two countries, indexed by H and F, that can trade in consumption and capital, but not labor. The production functions for the one consumption good in this economy are F(K, sz), for j E {H, F}. The factor endowments of capital and labor are (Ki, Lj), for j E {H, F}. The production functions exhibit constant returns to scale and markets everywhere are competitive. Write vj and 103- for the factor prices of capital and labor in country j E {H, F}. Write M 3- for the amount of capital used to produce consump- tion in country 3' E {H, F}. a. Set up a diagram with MH on the horizontal axis and Mp on the vertical axis that shows how the equilibrium quantities of capital are determined. b. Use your diagram to show what happens to MH and MF when there is a small increase in 211:. c. What happens to the factor price of capital and to consumption in country H when there is a small increase in 251:? Explain