Question

The standard trade model. Home and Foreign have two factors of production, land and labor, with which they produce two goods, wheat and wine. Technology is the same in the two countries. Wheat is land intensive, and Home is land abundant. Graphically analyze the effects on the terms of trade and welfare of the two countries of the following:

(a) An increase in Home’s amount of land.

(b) An increase in Home’s labor supply.

(c) An increase in Foreign’s amount of land.

(d) An increase in Foreign’s labor supply.

Answer 1

The answer is  AN INCREASE IN HOME'S LABOR SUPPLY.

The option B is correct answer

EXPLANATION:

1.In the given two countries,If any country trading well to the other countries means the country is improved and economically well developed.

2.For Suppose the two countries are concentrating trade and assistance to each other than both the countries will earn a good revenue.

3. It is mostly  impacts will show on both the country’s GDP (Gross Domestic Product).

4.Here, they are focusing mainly on the trades of Wheat and Wine. The home country had an intensive land so they mainly focusing on the supply of labor.

5.So, the home country better to get more labor of home rather than use foreign labor supply.