1. Let's assume that there are two countries (United Kingdom and France), two goods (machines and food), and two factors of production (skilled labor and unskilled labor). Also, suppose that the United Kingdom is skilled-labor abundant while France is unskilled-labor abundant. Assume further that machines are skilled-labor intensive and food is unskilled-labor intensive. What will happen to the wage of skilled labor relative to the wage of unskilled labor in each country by using the the short-run specific-factors model? Explain.

1. Let's assume that France receives an inflow of foreign direct investment (FDI). Additionally, suppose that labor and capital are used in the production of wheat and computers. Suppose that computers are capital intensive as compared with wheat. Using the long-run specific-factors model, explain what happens to the output of each good by providing the numerical justification.

1. Suppose that the United Kingdom and the United States have the factor endowments given in the table below:

	UK	USA
Capital	60 computers	10 computers
Labor	300 workers	100 workers

Suppose further that the production requirements for a unit of manufacturing goods is two machines and eight workers, and the requirement for a unit of agricultural goods is one machine and eight workers.

Which good, manufacturing or agricultural, is relatively intensive in the use of capital? In labor? Show how you know; numerical justification is required. Which country would export agricultural goods? Why?

Show all your calculations step by step on how to reach your solutions; a single numeric answer will not be given any credit.

4. Let's assume that before international trade opens up, Russia is at a point on its production possibility curve (PPC) where it produces 40 apples and 40 computers. Once trade opens up, the price of a computer becomes two apples. In response, Russia moves along its PPC to a new point where it is producing 50 computers and 20 apples. Is Russia now better off? Explain by providing numerical justification.

Show all your calculations step by step on how to reach your solutions; a single numeric answer will not be given any credit.