Two countries, Home and Foreign, both able to produce two goods: cloth and tablet computers. The production of both goods uses capital and labor in fixed proportions, with the tablets industry using more capital per worker than the cloth industry. The units of each input needed to produce one unit output are given by:

capital. labor

cloth 1 2

tablets 2 1

Both countries have 150 units of capital available for production, but the Home country has 100 units of labor whereas the Foreign country has 200. Consumers like to consume both goods and have the same preferences in both countries. Assume that the countries are closed to international trade.

1. a)Construct the PPF for both countries and put them in the same graph. Show in the graph the quantity of both cloth and tablets that are produced by each country in equilibrium, if the countries are not trading. Compute these quantities algebraically.
2. b)Which country produces more cloth relative to tablets? Indicate how this feature relates to thecountry's relative factorendowments.
3. c)Compute the quantities of labor and capital employed in each country in the production of each of the goods at the output levels in a).
4. d)Indicate the range of prices of cloth relative to tablets at which the Home country will produce both goods. Which good would be produced if the relative price was outside of this range?
5. e)In which country will the price of cloth relative to tablets be higher? Explain.
6. f)Assume that both countries open to trade with each other. Explain how the price of cloth relative to trade will change in each country after opening to trade.

g)According to the Heckscher-Ohlin theorem, if these two countries opened to trade, which country would export which good? Explain.

h)Give intuition about who will be better off and who will be worse off in each country after opening to trade. Explain.