Consider two countries (Home and Foreign) that produce goods 1 (with labor and capital} and 2 (with labor and land). Initially, both countries have the same supply of labor (200 units each ), capital, and land. The capital stock in Home then shrinks. This change shifts in both the production curve for good 1 as a function of labor employed and the associated marginal product of labor curve. Nothing happens to the production and marginal product curves for good 2. a. Show how the decrease in the supply of capital for Home affects its production possibility frontier. Using the three-point curved line drawing tool, draw a new PPF for Home that reects the decrease in the supply of capital. Properly label the curve. Carefully follow the instructions above and only draw the required object. I). Given the decrease in the supply of capital for Home, the relative supply of Home (dened as (.11in) is further to the I: than the relative supply for Foreign. As a result, the relative price of good 1 is EVE in Home than it is in Foreign. c. If those two economies open up to trade. what will be the pattern of trade (i.e., which country exports which good)? If both countries open to trade, Home will export EVE and Foreign will export I . Out utof odd 2 200 Home 20 PPFD Output of good 1 ,0 d. Describe how opening up to trade affects all three factors (labor, capital, land) in both countries. Owners of O A. land in Home and owners of capital in Foreign will benefit from trade, while owners of capital in Home and owners of land in Foreign will be hurt. O B. land in Home and Foreign will benefit from trade, while owners of capital in Home and Foreign will be hurt. O C. capital in Home and Foreign will benefit from trade, while owners of land in Home and Foreign will be hurt. O D. capital in Home and owners of land in Foreign will benefit from trade, while owners of land in Home and owners of capital in Foreign will be hurt