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Problem 2: Consider a HeckscherOhlin setting where two countries, Domestic and Foreign, pro duce cookies (0) and hot chocolate (H) The production of both goods
Problem 2: Consider a HeckscherOhlin setting where two countries, Domestic and Foreign, pro duce cookies (0) and hot chocolate (H) The production of both goods requires only highskilled and lowskilled labor, both of which are freely mobile across industries. Suppose that by opening up to trade, the price of cookies in Domestic falls by 10%, and the price of hot chocolate does not change. Use the information below to answer 2.1. Industry Variable $ Cookies Sales Revenue $300 Cookies HighSkilled Labor Payments $200 Cookies Low-Skilled Labor Payments $100 Hot Chocolate Sales Revenue $200 Hot Chocolate HighSkilled Labor Payments $40 Hot Chocolate LowSkilled Labor Payments $160 2.1. By what percent does the wage rate to highskilled labor change? To lowskilled labor
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