Let us assume a 2x2x2 model (country H & F, good A & B, factors L & K).

The two countries are identical except L < L* and K > K*

(c) For country F, using iso-quants and iso-costs, show that due to trade between H and F the factor that has been used intensively in the export sector will gain and the factor that has been used intensively in the import sector will lose.

(d) Now suppose the relative demand for good A (Rd) is NOT identical in H and F. Rather at each relative world price of good A, the H country's relative demand for good A (Rd) is way smaller than that of country F. In this case show the autarky prices using a graph with world relative supply and relative demands and show the direction of trade.