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Could you please provide step by step solution? I need your help and a clear explanation. I would be grateful. Thanks in advance. Problem 2
Could you please provide step by step solution? I need your help and a clear explanation. I would be grateful. Thanks in advance.
Problem 2 (HeckscherOlilin model) [week 3] Consider a world with two countries, Home 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 country 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. b) Which country produces more cloth relative to tablets? Indicate how this feature relates to the country's relative factor endowments. c) Compute the quantities of labor and capital employed in each country in the production of each of the goods at the output levels in a). d) Indicate the range of prices of cloth relative to tablets at which the Home country will produce both goods. Which good would be produced if the relative price was outside of this range? e) In which country will the price of cloth relative to tablets be higher? ExplainStep by Step Solution
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