Consider two countries, Home (relatively land-abundant) and Foreign (relatively labor-abundant), that use labor (L) and land (T) to produce clothing (L- intensive) and food (T-intensive). Both factors freely move across sectors.

The production technology in each sector demonstrates constant returns to scale with diminishing returns of marginal product of each factor and factor complementarity. Consumers in this economy exhibit homothetic preferences.

W, Rdenote worker wages and rental rate of land respectively. Suppose that the two countries engage in free trade. Use diagrams and equations to justify your answers below.

(a)Which country exports clothing? Which country exports food?

(b)How does the wage rental ratioW/Rchange in Home?

(c)What happens to the land to labor ratio (T/L) in each sector in Home?

(d)Will the landowners in Home be in favor of imposing protectionist trade policies on Foreign imports? Describe how their real incomeR/P_CandR/P_Fchanges with trade.