ckscher-Ohlin Model 2. There are two countries, Home and Foreign. There are two goods: beer (b) and corn (c), which are produced in both countries using capital (K) and labor (L). In both countries, it takes 2 units of labor and 1 unit of capital to make beer (aLb=2,aKb=1); and it takes 5 units of labor and 5 units of capital to make corn (aLc=5,aKc=5). Home has 100 units of labor and 100 units of capital (L=100,K=100), while Foreign has 120 units of labor and 20 units of capital (L=120,K=20). (a) Which country is capital abundant? Which country is labor abundant? (b) Which good is capital intensive? Which good is labor intensive? (c) According to the Heckscher-Ohlin theorem, what is the pattern of trade for both Home and Foreign countries? (d) On a graph with the quantity of beer (QB) on the x-axis, and the quantity of corn (QC) on the y-axis, draw the Home PPF. Which sector is it skewed towards? In autarky, what is the relationship between consumption and production? (e) On a graph with the quantity of beer (QB) on the x-axis, and the quantity of corn (QC) on the y-axis, draw the Foreign PPF. Which sector is it skewed towards? (f) In the Home graph: Based on the pattern of trade derived earlier, draw the new world relative price ((PB/PC)T). Then draw the free-trade equilibrium, labeling the consumption point by C and the production point by B. Indicate clearly on the graph the quantity of beer and corn produced (QBT and QCT), the quantity of beer and corn consumed (DBT and DCT), and the quantity of imports and exports. Note: you do not have to solve for these exact quantities. ckscher-Ohlin Model 2. There are two countries, Home and Foreign. There are two goods: beer (b) and corn (c), which are produced in both countries using capital (K) and labor (L). In both countries, it takes 2 units of labor and 1 unit of capital to make beer (aLb=2,aKb=1); and it takes 5 units of labor and 5 units of capital to make corn (aLc=5,aKc=5). Home has 100 units of labor and 100 units of capital (L=100,K=100), while Foreign has 120 units of labor and 20 units of capital (L=120,K=20). (a) Which country is capital abundant? Which country is labor abundant? (b) Which good is capital intensive? Which good is labor intensive? (c) According to the Heckscher-Ohlin theorem, what is the pattern of trade for both Home and Foreign countries? (d) On a graph with the quantity of beer (QB) on the x-axis, and the quantity of corn (QC) on the y-axis, draw the Home PPF. Which sector is it skewed towards? In autarky, what is the relationship between consumption and production? (e) On a graph with the quantity of beer (QB) on the x-axis, and the quantity of corn (QC) on the y-axis, draw the Foreign PPF. Which sector is it skewed towards? (f) In the Home graph: Based on the pattern of trade derived earlier, draw the new world relative price ((PB/PC)T). Then draw the free-trade equilibrium, labeling the consumption point by C and the production point by B. Indicate clearly on the graph the quantity of beer and corn produced (QBT and QCT), the quantity of beer and corn consumed (DBT and DCT), and the quantity of imports and exports. Note: you do not have to solve for these exact quantities