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please answer 12. In the context of the Heckshcer-Ohlin framework, suppose country A has the comparative advantage in good X and that good X is

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12. In the context of the Heckshcer-Ohlin framework, suppose country A has the comparative advantage in good X and that good X is the relatively K-intensive good. (Of course, this means that country B would have the comparative advantage in good Y, and good Y is the relatively L-intensive good). Then let trade open, and suppose the price of good X increases and suppose the price of good Y stays the same (from country A's point of View} - i.e., APy = 0. Suppose we have already correctly reasoned that the rental price of capital, r, will increase. Then consider the prot-maximization conditions in industries X and Y. PX =aLX-w+aLX -7' -PY :GLYw+GLY?' where an and am are the labor and capital input requirements for good 'j.' (Also. to make the analysis a easier, you may assume that 3L] and 3K] are constant.) Using all of this information we can also say that upon opening of free trade, country A will see 0 the real rental price of capital decrease. O the real rental price of capital decrease. O the real wage decrease. O the real wage stay the same. 0 the real rental price of capital stay the same

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