assigned country: US

All three countries observe the same relationship between relative price of mask (PMask/PVaccine) and relative factor price of labor (w/r) shown on the SS diagram on page 5.

a. (3 points) Under autarky (in absence of trade), the assigned country produces and consumes 400 units of masks and 400 units of vaccines.

A relationship between the relative price of mask (PMask/PVaccine) and the relative factor price of labor (w/r) is given on the diagram on Page 6 of this assignment. Given the relative price of mask under autarky, how much is a relative factor price of labor (w/r) in the assigned country? [Show it on the SS diagram]

A relative price of mask (PMask/PVaccine) of the Europe is 1, how much is a relative factor price of labor (w/r) in the Europe? [Show it on the SS diagram]

As compared with the Europe, is the assigned country labor-abundant or capital-abundant?

b. (2 points) The assigned country and the Europe agree to trade goods at a relative price of mask at 1 (PMask/PVaccine =1). According to the Heckscher-Ohlin Theorem, which goods are labor-intensive, masks or vaccines? Which goods are capital-intensive, masks or vaccines?

As the assigned country engages in trade (as compared with the autarky), will the relative factor price of labor (w/r) increase or decrease in the assigned country?

Econ452 Diagrams for Homework Assignment #8-B Spring 2022 PPF Diagram of the U.S. Vaccines U.S. PPF 750 500 250 0 250 500 750 Masks SS Diagram: Relationship between Relative Price of Mask (Pasl/Pvaccine) and Relative Factor Price of Labor (w/r) SS Pak/vaccine 5 4 3 2 3 w/r wr Econ452 Diagrams for Homework Assignment #8-B Spring 2022 PPF Diagram of the U.S. Vaccines U.S. PPF 750 500 250 0 250 500 750 Masks SS Diagram: Relationship between Relative Price of Mask (Pasl/Pvaccine) and Relative Factor Price of Labor (w/r) SS Pak/vaccine 5 4 3 2 3 w/r wr