Country A has 400 units of labor and 600 units of machinery whereas Country B has 400 units of labor and 600 units of machinery. In both countries, the inputs required to produce gasoline and 1 unit of shoes are as follows. It is assumed that both countries have the same spending structure.

	labor	machinery
gasoline	4	10
shoes	6	5

1. Describe the equation for Production Possibility Frontier of Country A

2. Draw the Production Possibility Frontier of Country A

3. Describe the equation for Production Possibility Frontier of Country B

4. Draw the Production Possibility Frontier of Country B

5. Explain why the PPFs of County A and Country B are not identical even when level of technology in both countries are the same

6. Are Country A and Country B Capital abundant Country or Labor abundant Country, explain why

7. Is gasoline a capital intensive good or labor intensive good?, explain why

8. Between two countries, which countries have relatively low income in comparison to the cost of the capital?

9. Which country has comparative advantage in producing gasoline as compared to producing shoes and why?

10. Before trade, the Relative Price of good X of both Country A and B is equal to the opportunity cost and is set as 2/3 and 2. What is the range of relative income when 2 countries begin to trade?

11. Explain the trade pattern of two countries by using Hecksher Ohlin Model