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2. (8 points) Table I gives the factor prices in U.S. and U.K., and Table 2 gives the production requirements of commodity X and Y

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2. (8 points) Table I gives the factor prices in U.S. and U.K., and Table 2 gives the production requirements of commodity X and Y in the two nations. Answer the following questions. Table 1 Interest rate Wage rate U.S. 8% $3/hour U.K. 5% $20/hour Table 2 U.S. U.K. Capital Labor Capital Labor Commodity X 3 2 Commodity Y 2 6 12 A. (2 points) Which nation is capital-abundant? Which nation is labor-abundant? B. (2 points) In each nation, which commodity is capital-intensive? Which commodity is labor-intensive? C. (2 points) According to the Heckscher-Ohlin theorem, how should each nation specialize in production and which country is expected to export commodity X? D. (2 points) According to the Stolper-Samuelson theorem, labor unions in which country will be in favor of free trade? Explain briefly (1-2 sentences should be sufficient)

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