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Suppose when a country Opens to trade, it imports automobiles, a capitalintensive good. Goods are produced using two factors of production: Capital (K) and Labour

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Suppose when a country Opens to trade, it imports automobiles, a capitalintensive good. Goods are produced using two factors of production: Capital (K) and Labour (L). (a) According to the HeckscherOhlin theorem, is the country capital abundant or labour abundant? (b) What is the impact of opening trade on the real wage for this country? (c) What is the impact of opening trade on the real rental on capital? ((1) Which group (capital owner or labour) would support policies to limit free trade? Explain. (e) Suppose there is one other good, textiles, production of which is labourintensive. Show the PPF for the country and track the changes (production, consumption and prices) for the country before and after trade

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