Consider a two-country, two-goods world, and the countries face increasing opportunity costs. Home is endowed with a production technology that gives them a comparative advantage in the producing good Y while Foreign is endowed with a with a production technology that gives them a comparative advantage in the producing good X. Households in both countries share the same consumption preference (i.e., they have same set of indifference curves).

Both countries are trading with each other already. Recently, Home experiences an increase in total factor productivity in both goods X and Y (in the same proportion). The change in production technology does not change the world relative price of X. In words, with the aid ofONEwell-labelled diagram, answer the following questions:

Show the initial free-trade equilibrium for both countries (Home and Foreign). Be sure to identify the production and consumption bundles.

Show the new free-trade equilibrium for both countries after the change in Home's production technology.

After this change in Home's production technology, discuss, in words, the trade patterns and what happens to the well-bring in both Home and Foreign.

Note, when describing the trade patterns, focus on the qualitative analysis not the quantitative analysis (i.e., no need to describe whether the exports/imports of a good increase or decrease, just mentioning which goods the country exports/imports would be sufficient).

Note: You may want to draw a big diagram.