\fConsider a world with two countries, the home country, indexed by H, and the foreign country, indexed by F. The two countries are endowed with K units of capital, and L; units of labor, where j {H.F}. Assume that Ky/Ly > K/Lg > (. There is a produc- tion function F (K, L) that is strictly increasing in both arguments, concave, and exhibits constant returns to scale. Everything can be traded domestically, and consumption and capital goods can be traded internationally. Markets are competitive. In country j, the factor prices of capital and labor are v; and w;, measured in units of domestic consumption. Write M, for the equilibrium quantity of capital used in country j. The home country imposes a tariff #,; [0.1] on imports of consumption goods, and the foreign country imposes a tariff [0, 1] on imports of capital goods. More precisely, someone who carries units of consumption through customs into the home country has to pay the government fur, measured in units of home-country consumption. And someone who carries K units of capital through customs into the foreign country has to pay the foreign government 7 vk, measured in units of foreign consumption