Consider two countries (England and India) that can produce two goods (cloth and trains) using two factors (labor and capital). The technology to produce each good is the same in either country and allows for substitution among inputs. Cloth production is labor intensive while train production is capital intensive. England is relatively capital abundant, and India is relatively labor abundant. Use diagrams and equations/ explanations to justify your answer.

A. Show how wages and the rental price of capital change in India when the country goes from autarky to free trade with England. Will Indian capitalists (the owners of capital) be in favor of free trade with England?

B. What will happen to the capital labor ratio (K/L) in the cloth and train sectors England after opening to trade?