Question: Please help Consider two countries (Home and Foreign) that produce goods 1 (with labour and capital) and 2 (with labour and land) according to the

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Consider two countries (Home and Foreign) that produce goods 1 (with labour and capital) and 2 (with labour and land) according to the production functions described in specic factors model. Initially. both countries have the same supply of labour (100 units each), capital and land. The capital stock in Home then grows. This change shifts out both the production curve for good 1 as a function of labour employed and the associated marginal product of labour curve. Nothing happens to the production and marginal product curve for good 2. a. Show how the increase in the supply of capital for Home affects its production possibility frontier. Place good 1 in the horizontal axis. (4 marks) b. If those two economies open up to trade. what will be the pattern of trade (i.e. which country exports which good)? (4 marks) c. Describe how opening up to trade affect all three factors (labour. capital. land) in both countries. (12 marks)

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