Now assume France engages in free trade and in the world market the price of wine is 10% lower than in France, while the price of airplanes does not change. c. (2 marks) Redraw the diagram in point (a) and let the price of wine fall by 10%. cl. (1 mark) What happens to the labour demand curves in the airplane sector and in the wine sector? (2 marks) What happens to the allocation of labour and why? f. (2 marks) Who wins and who loses in France after opening to trade? Briey explain. Question 3 The Heckscher-Ohlin Model of Trade 10 marks (3+3+1+3) Assume two economies Germany (GER) and Cambodia (CAM) produce cars (C) and rice (R) using two factors, capital (K) and labour (L), which are mobile across sectors. Cars production is capital intensive and rice production is labour intensive. Further, Germany has 120 units of labour and 120 units of capital, while Cambodia has 100 units of labour and 80 units of capital. The cost of labour is w. The cost of capital IS r