3. Assume that there are only two countries (Japan and Taiwan) currently producing and consuming two types of commodities (cheese and soap) by using capital and labour. The details of information are provided in Table 2.

Table 2: Factor endowment

Capital (total machine) Labour (total manpower)

Japan 140,000 600,000

Taiwan 70,000 340,000

The relative price of soap in Taiwan is lower than in Japan. Graphically elaborate the mutually beneficial trade could happen between Japan and Taiwan. Explain the trade pattern and the well-being of labour and capital owners in both countries. (18 marks)