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Could anyone please help me with this question? Thank you! I will give good reviews. II. (25 points) Consider a model of trade between China

Could anyone please help me with this question? Thank you! I will give good reviews.

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II. (25 points) Consider a model of trade between China and the USA, in which the resources available for production in both countries are skilled labor (SL) and unskilled labor (UL). Suppose the USA has 100 million skilled workers and 100 million unskilled workers, while China has 100 million skilled workers and 300 million unskilled workers. Each country produces hardware (HW) and software (SW) under perfect market conditions, using both skilled labor and unskilled labor and production functions characterized by constant returns to scale. Software production is relatively more intensive in skilled labor. Assume preferences and available technologies are identical across countries and that factors of production are mobile across sectors within countries. a. Graph the PPFs for both countries, with HW on the horizontal axis, and illustrate the autarky equilibria. Which country has the higher price ratio (PHw/Psw)? Which country has the higher skilled wage ratio (WSL/WUL)? Which country uses more SL-intensive technologies? b. Under perfect free trade between the two countries, what would the HeckscherOhlin theorem predict regarding the pattern of trade? Compare the free trade equilibria to the autarky equilibrium on your PPF graphs for the two countries. 0. According to the Stolper-Samuelson theorem, how would free trade affect the skilled wage ratio (WSL/WUL) in each country? (1. If the United States were twice as productive as China in producing both goods, would factor prices be equalized (across countries) with trade? Illustrate using a Lerner Diagram (no major explanations required)

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