Suppose two countries, Canada and Mexico, produce two goods: timber and televisions. Assume that land is specific to timber, capital is specific to televisions. When Canada and Mexico engage in free trade, the relative price of televisions falls in Canada and the relative price of timber falls in Mexico.

Which country is land-abundant? Which country is capital-abundant?

Which good is land-intensive? Which good is capital-intensive?

What is the immediate impact of opening trade on the value of capital rent and land rent in Canada? What are the short-run effects on the production of timber and televisions in Canada?

d. What is the immediate impact of opening trade on the value of capital rent and land rent in Mexico? What are the short-run effects on the production of timber and televisions in Mexico?