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The Czech Republic (Czechia) produces 2 goods: Skoda cars & pilsner beer. There are 2 factors of production, capital & labor. The fixed factor requirements

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The Czech Republic (Czechia) produces 2 goods: Skoda cars & pilsner beer. There are 2 factors of production, capital & labor. The fixed factor requirements for each product are given below. Machine-Hours Worker-Hours per unit per unit Skodas 20 5 Pilsner 5 10 Czechia's original labor endowment is 100 hours. Following its entry into the EU, it receives a influx of investment from Germany that raises the available pool of capital from 100 to 200. a. After this investment influx, what is likely to happen to the pattern of Czechian exports (cars vs beer) to the rest of the world? Explain using Heckscher-Ohlin model logic. (What has happened to the relative abundance of K vs L in Czechia? What else do you need to know?) b. If Germany continues to lose capital to Czechia, what could happen to Germany's pattern of exports to Czechia? c. According to the Stolper-Samuelson theorem, which Czech factors of production will gain and which will lose after opening trade with more labor-abundant members of the EU

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