Consider two countries, Home and Foreign, engaging in free trade with one another. Each country uses two factors, capital and labor, to produce two goods, trains and hats. Assuming that Home exports computers and Foreign exports shoes, reproduce Figures 4-2, 4-3, and 4-4 for each country and determine the world relative price of trains in a figure similar to Figure 4-5.

Figures 4-2, 4-3

Figure 4-5:

Transcribed Image Text:

Output of shoes, as Q51 (a) Home Relative price of computers, slope = (Pr/Ps) aci Home PPF Output of computers, Qc Output of shoes, Q Q₁ Foreign PPF (b) Foreign Qa Feenstra/Taylor, International Trade, Se © 2021 Worth Publishers -Relative price of computers, slope = (P/P)* Output of computers, Q