assume there are two countries, Canada and Italy, which are almost identical. They have the same tastes (the same demand curves), the same technology, and the same amount of capital and labor; however, Canada has more land than Italy.

i) Based upon your results from part (b), what predictions would you make concerning the autarky (no trade) relative price of clothing in Italy as compared to Canada? (a verbal answer suffices)

ii If trade is allowed between the two countries, what will the pattern of trade be and how will the relative price of clothing change in each country? (6 points).

iii Discuss how trade affects the real return to each factor (capital, land and labor) in each country. Does each country as a whole potentially gain from trade? Does each interest group (factor owner) in each country also gain?Be as precise as possible (a verbal answer suffices).

iv Suppose in addition to more land Canada also had better technology in clothing. Would your answer change? Explain