Consider the specific factors model. Make the following assumptions:

• There are two countries: Home and Foreign.
• There are two goods produced in each country: corn and microprocessors.
• Technology of production is the same in both countries and exhibits diminishing re- turns.
• There are 3 factors of production: unskilled labor (Lu) which is specific to the produc- tion of corn, skilled labor (Ls) which is specific to the production of microprocessors and capital which is assumed to be freely mobile across industries.
• Unskilled workers are paid the wageWu, skilled workers are paid the wageWs, and the rental rate of capital isR.
• Suppose that after trade, in the Home country, the price of corn (Pc) decreases and the price of microprocessors (Pm) does not change.

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Please answer the following questions and focus on the Home country:

1. (a)Which good is the Home country exporting? Justify your answer. (4 points)
2. (b)make a box diagram for the mobile factor market (capital), and show the effect of trade on the nominal rental rate (R), the capital used in the production of corn (Kc) and the capital used in the production of microchips (Km). Label the no-trade equilibrium as pointA, and the equilibrium after trade as pointB.(8 points)
3. (c)Has the real wage of unskilled workers increased or decreased after trade? Justify your answer. (4 points)
4. (d)Has the real wage of skilled workers increased or decreased after trade? Justify your answer. (4 points)
5. (e)Has the real rental rate increased or decreased after trade? Justify your answer. (6 points)