Assume 2-country (home and foreign) 2-factor (labor and capital), 2- good (clothing and software) Heckscher- Ohlin model. Clothing is relatively labor-intensive good. The maximum amount of clothing home country can produce is 10 and the maximum amount of software home country can produce is 12.

a. Draw the production possibility frontier for home country. (Have the quantity of clothing on the horizontal axis.

b. If the price of clothing is 2 and the price of software is 4, draw an Iso-value line which gives the maximum value of production in home country.

c. Using the diagram from parts a) and b) find the production point in home country before trade.

d. Redo parts (a), (b) and (c) when the price of software decreases to 2.