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The following graph depicts how the Home country trades in a specic factor model with two industries. land is specic to the agriculture industry. capital

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The following graph depicts how the Home country trades in a specic factor model with two industries. land is specic to the agriculture industry. capital is specic to the manufacturing industry, labour is freely movable between the two industries. The output of agriculture and manufacturing industries are on the vertical and horizontal axis respectively, Determine the following: a. What's Home's comparative advantage? Why? (2 marks) b. Which points on the graph shows (1) Home's equilibrium when there's no trade (2) Home's production and consumption when there's trade. Explain why. (3 marks) c. Which good is imported and which is exported by Home? Explain. (2 marks) (1. Explain why the overall gains from trade are still positive. (3 marks) unmet-rum a. omlm

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