1.The following question comes from rigid technology case in Heckscher-Ohlin Model:

Suppose the following table of unit labor and capital requirements for X good and Y good is given with Home endowment of labor(L)=300 and capital (K) =200 and Foreign endowment of labor (L*) =200 and capital (K*) = 200

LaborCapital

Good X12

Good Y31

(a)Solve for equilibrium output levels for Home Country: X=Y=

(b)Solve for equilibrium output levels for Foreign Country: X*=Y*=

(c)Suppose the pre-trade price at Home Country was Px = $12 Py = $10 and at Foreign Country was Px* =$8 Py =$10. Find out wage rate (w) and rental rate (r) for Home Country.W =r=

And for Foreign Country. W* =r*=

(d)Suppose the after trade prices became Px**=$10 and Py**=$10

What is the after-trade equilibrium wage level (W**) and rental rate (r**)?

W**= __________and r** =_____________________

(e)Show how factor price equalization theorem is established:____________________________________________

(f)In the following Diagram, the above numerical example is illustrated. Identify the production -possibilities schedule for Foreign Country. Choose one from:

GQM______ FQM_____NAM_______FQW________ NAZ___________

(g)Identify the production- possibilities schedule for Home Country. Choose one from: GQM______ FQM_____NAM_______FQW________ NAZ___________

(h)Using above numerical example, identify numerically the quantity of X good produced and Y good produced at Point A: Quantity of X good=_____ Y good________

(i)Using above numerical example, identify numerically the quantity of X good produced and Y good produced at Point Q: Quantity of X good=_____ Y good________

(j)Using above numerical example, identify numerically the quantity of Y god produced at Point N: Quantity of Y good at Point N;________________

(k)Estimate the pre-trade wage/rental ratio (q=w/r) in Home Country: q=w/r=_________

(l)Estimate the pre-trade wage/rental ratio (q*=w*/r*) in Foreign Country: q*=w*/r*=_________

(m) Estimate the after-trade wage/rental ratio (q**=w**/ r**) equalized in international market: q**=w**/ r**=________________________

(n)Estimate the after-trade relative price of Food/Clothing:

Px = Px/Py=Pf/Pc =_______________________

Paragraph Styles 6 8 10 12 14 16 18 20 22 24 26 28 30 32 34 36 38 40 42 7 Y good- G-300- F=1004 H A 0 M=100 Z=200 W-300 X good (2 points each for (a) (b), 6 points for (c), total 10 points) Suppose the above information and assumptions in Question 4 are adopted but applied into Flexible