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Consider the Specific Factors model with two economies (Canada and Saudi Arabia); two goods (wheat and oil); and three inputs: labor (mobile across sectors), land

Consider the Specific Factors model with two economies (Canada and Saudi Arabia); two goods (wheat and oil); and three inputs: labor (mobile across sectors), land (specific to wheat) and capital (specific to oil). Suppose that preferences are identical, but Canadian productivity is higher in wheat, while Saudi Arabian productivity in oil. (a) Describe (graphically) the autarky equilibrium in both economies. In which country is the relative price of wheat, pW / pO , higher?

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