Consider the simple Heckscher-Ohlin model discussed in class, with two countries, two goods, and two factors, and incomplete specialization. The two countries are Turkey and Vietnam, the two factors are capital and labor, and the two goods are chemicals and apparel. You are given the following data on the factor endowments for Turkey and Vietnam. Turkey has a labor force of 75 million workers and a capital stock of 375 thousand machines. Vietnam has a labor force of 80 million workers, and a capital stock of 240 thousand machines. Assume that machines and workers are comparable units.

a) Which country is relatively capital abundant? Which country is relatively labor abundant? Explain.

b) Suppose that the production of chemicals is capital intensive relative to apparel. Which country will have comparative advantage in the production of chemicals? Explain.

c) Explain which factor gains the most in Vietnam from free trade.

d) Which group in Turkey would resist signing a free trade agreement with Vietnam: workers or capital owners?

e) Use a figure to show whether free international trade improves the standard of living in Turkey and Vietnam as a whole, or not.