the image below goes with question 12
\f12. In the context of the Heckshcer-Ohlin framework, suppose countryA has the comparative advantage in good X and that good X is the relatively Kintensive good. (Of course, this means that country B would have the comparative advantage in good Y, and good Y is the relatively L-intensive goodl Then let trade open, and suppose the price of good X increases and suppose the price of good Y stays the same (from country A's point of view) - i.e., . Suppose we have already correctly reasoned that the rental price of capital, r, will increase. Then consider the prot- maximization conditions in industries X and Y. 433q12p=MC.png where an and 3K] are the labor and capital input requirements for good 'j.' (Also, to make the analysis a easier, you may assume that an and am are constant.) Using all of this information we can also say that upon opening of free trade, country A will see A the real rental price of capital stay the same. that upon opening of free trade, country A will see A. the real rental price of capital stay the same. A. the real wage decrease. A the real rental price of capital decrease. A the real wage stay the same. A the real rental price of capital decrease. Question 13 2.3 pts 13. Suppose in the Heckscher-Ohlin framework that in countries A and B it takes aLx = 14 units of labor to make 1 unit of thile it takes aKX = 5 units of capital to make 1 unit of good X. Suppose also that it takes aLY = 18 units of labor to make 1 unit of Y while it takes aKY = 6 units of capital to make 1 unit of good Y. Suppose that in country A has KA = 150 units of capital and LA = 100 units of labor. Suppose also that country B has KB = 200 units of capital and L3 = 120 units of labor. Using this information, we can say that A country A has a comparative advantage in X. A country A will tend to move toward specialization in good Y and import good X if we move from autarky to free trade. A country A will see the relative price of X increase if we move from autarky to free trade. A country B has a comparative advantage in Y. A none of the other options