Suppose two countries can produce and trade two goods - food (F) and cloth (C). Production technologies for the two industries are given below and are identical across countries: QF = KAL Qc = KOLd where Q denotes output and K; and L; are the amount of capital and labor used in the production of good i. Suppose the SS curve is given by the following function: PE pc ( ) Also assume that the relative price of food is equal to one. c. Now we add information on factor endowment. Suppose a country has K = 90 units of capital and L = 60 units of labor and the following full employment conditions are satisfied: KF + Kc = K LF+ Lc = L d. Suppose labor endowment increase to L = 90. How would it affect output of capital-intensive and labor-intensive goods? e. Going back to the case when L = 60, demonstrate the effect of a decrease in price of food to BE = (0.8) . Solve for the new production patterns and w/r and confirm the Stolper-Samuelson theorem