PART 1. Idernational Trade Theory 1 Go back to the numerical example with no factor substitution that leads to tl c production possibility frontier in Figure 5-1. a. What is .he range for the relative price of clot h such that lie 6 concmy produce: both cl )th and food? Which good is produced if the relative price is outside this rar ge? For parts ('3) through (f), assume the price range is sucn that both goods art: produced. b. Write down the unit cost of producrg one yard cf not\" a 1d one calorie of feud as a function of the price of one machine-hour, r, and one work-hour. W. In a competitive market, these r'osts will be equal to the prices of cloth and food. Solve for the factor prices r and w. / c. What happens to those factor prices when the price of cloth rises? Who gains and who loses from this change in the price of cloth? Why? Do those changes conform to the changes described for the case with factor substitution? d, N ow assume the economy's supply of machine-hours increases from 3,0L'0 to 4,000. Derive the new production possibility frontier. e. How much cloth and food will the economy produce after this increase in its :apital supply? f. Describe how the allocation of machine-hours and work-hours between the cloth and food sectors Chances Do those changes conform with the Changes