Question

5 Heckscher-Ohlin Model. Suppose the production of cloth is labour intensive and the production of food is land intensive and suppose the United States (US) is labour abundant and Canada is land abundant. (a) Show how the US production possibility frontier (PPF) differs from the Canadian PPF. Briefly explain. (Use the general version of the PPF's) (b) Which country will have the lower price of cloth Pc relative to the price of food Pr (assume Pr 1in both countries) if the two countries do not engage in international trade? Explain with the aid of a diagram (c)Which country has the lower wage rate assuming the two countries do not engage in international trade 6 True or False. In the Heckscher-Ohlin model if the endowment of labour relative to the endowment of land is the same in both the Home and Foreign countries (L/T = L* /T*) then then the autarky relative price of cloth in terms of food will be the same in both countries Explain with the aid of a diagram

These questions are about international trade.

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Answer 1

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