Consider a World with tWo countries. Horne and Foreign1 both able to produce two goods: cloth and food. The production of both goods uses capital and labor in fixed proportions, with the food industry using more capital per worker than the cloth industry. The units of each input needed to produce one unit output are given by: Home has units of capital and lil units of labor, whereas Foreign has 12 units of capital and 16 units of labor. Consumers like to consume both goods and have the same preferences in both countries. Assume that the countries are closed to international trade. The relative demand of cloth relative to food is given by: a) Compute algebraically the quantity of each good produced in each country. b} Compute algebraically the quantities of labor and capital employed in each country in the production of each of the goods at the output levels in a), as well as the equilibrium relative price of cloth in autarky. c) Indicate the range of prices of cloth relative to food at which the Home country will produce both goods. Which good would be produced ifthe relative price Was outside of thi 5 range? Explain. d) Compute algebraically the equilibrium world relative price of cloth. Which conntry would export which good? Explain. e) |Give intuition about who will be better off and who will be worse off in each country after opening to trade. Explain