Consider a Heckscher-Ohlin framework where all factors are freely mobile and an autarkic country called the Magnificent Commonwealth Union (or the MCU for short) produces two kinds of movies: Blockbusters (denoted by B) and Fillers (denoted by F). Making a movie requires two inputs, visual artists (denoted by V ) and actors (denoted by A). To produce a Blockbuster the MCU needs to use five visual artists per actor, VB/AB = 5. To produce a Filler the MCU needs to use one visual artist per actor, VF /AF = 1. Suppose there are 2,000 visual artists and 500 actors in MCU. One movie requires fifteen actors and the corresponding number of visual artists depending on whether it is a Blockbuster or a Filler (e.g., one Blockbuster requires 15 actors and 75 visual artists).

Now suppose that the MCU opens up to trade with the Democratic Confederate Exchange Union (or the DCEU for short). The DCEU is not very good at making Blockbusters and wants to import some from the MCU, causing their price to rise by 10% (with the price of Fillers left unchanged). Suppose that in the MCU, revenues are $100, 000 for blockbusters and $10, 000 for fillers, visual artist expenditures are $50, 000 for blockbusters and $2, 000 for fillers, and actor expenditures are $20, 000 for blockbusters and $5, 000 for fillers.

3.7 What is the percentage change in nominal wages for visual artists?

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