1.Assume that tastes and technology are identical in China and Japan. Assume that China is labour abundant and Japan is capital abundant. Assume that production of clothing is labour intensive and production of automobiles is capital intensive.

a.Sketch the production possibilities frontier for China and Japan.Explain briefly why you drew them as you did.

b.In autarky, which country has a comparative advantage in production of which good? Why?

c.What does the Heckscher-Ohlin theorem predict would happen if trade were opened between China and Japan?

d.Show and label the autarky and unrestricted-trade equilibria, production and consumption points, imports and exports, autarky price ratiosand term of trade.