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Could you please provide a clear and step-by-step solution? I really need your help. If you solve it clearly, I would be grateful. Thanks in
Could you please provide a clear and step-by-step solution? I really need your help. If you solve it clearly, I would be grateful. Thanks in advance.
Problem 2 (HeckscherOhlin model) [week 3] Consider a world with two countries, Horne and Foreign, both able to produce two goods: cloth and tablet computers. The production of both goods uses capital and labor in xed proportions, with the tablets industry using more capital per worker than the cloth industry. The units of each input needed to produce one unit output are given by: Both countries have 150 units of capital available for production, but the Home cowltry has 100 units of labor whereas the Foreign country has 200. Consumers like to consume both goods and have the same preferences in both countries. Assume that the countries are closed to international trade. 1) Assume that both countries are open to trade with each other. Explain how the price of cloth relative to trade will change in each country after opening to trade. g) According to the Heckscher-Ohlin theorem, if these two countries opened to trade, which country would export which good? Explain. h) Give intuition about who will be better off and who will be worse off in each country after opening to trade. ExplainStep by Step Solution
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