we produced goods and services using factors that were specific to a particular economic sector.However, as we discuss in the current lesson, in the long-run, it is more reasonable to assume that factors of production are mobile across economic sectors.Therefore, the Heckscher-Ohlin model starts with the assumption that two goods are produced with the same two factors of production.For our purposes, let us call the two goods apples and computers and the two factors of production labor and capital.

One of the important vocabulary words that we learned in this lesson was factor-intensity.Assume that, in the home country autarky equilibrium, it takes 2 units of labor and 1 unit of capital to make a batch of apples.On the other hand, it takes 10 units of labor and 10 units of capital to make one computer.The home country has 2000 units of labor and 1000 units of capital.

------------------are the capital-intensive good and---------are the labor-intensive good.(Expected answers: "apples" or "computers")

Also assume that, in the home country autarky equilibrium the price of computers is $80 while the price of a batch of apples is $10.

Given this information, what can we say about the MPL in the computer industry relative to the MPL in the apple industry?

The MPK in the computer industry is _____________ than the MPK in the apple industry.(Expected answer:"higher"or "lower")

Suppose that the home country opens up to trade with a foreign country that has 3000 units of labor and 3000 units of capital.The-----------country is abundant in labor,and the----------------country is abundant in capital.(Expected answers:"home"or "foreign")

The-------------country has a comparative advantage in computers, and the--------------country has a comparative advantage in apples.

What will happen to production in the home country when the country opens up to trade?

Given your answer to the previous question,opening up to trade will cause the demand for labor relative to capital (L / K) to----------------.As a result the wage paid to workers relative to the return on capital (w / r) will--------------.(Expected answers: "increase" or "decrease")