Question: Problem 1: Consider a Specific-Factors setting where two countries, Domestic and Foreign, produce cookies (C) and hot chocolate (H). A-type capital is a factor specific

Problem 1: Consider a Specific-Factors setting where two countries, Domestic and Foreign, produce cookies (C) and hot chocolate (H). A-type capital is a

factor specific to cookies and J-type capital is a factor specific to

hot chocolate. The production of both goods also requires labor, which is

Problem 1: Consider a Specific-Factors setting where two countries, Domestic and Foreign, produce cookies (C) and hot chocolate (H). A-type capital is a factor specific to cookies and J-type capital is a factor specific to hot chocolate. The production of both goods also requires labor, which is freely mobile across industries. Suppose that by opening up to trade, the price of cookies in Domestic falls by 5%, wages fall by 3%, and the price of hot hot chocolate does not change. Use the information below to answer 1.1. Industry Variable Cookies Sales Revenue $30 Cookies Labor Payments $20 Cookies A-Type Capital Payments $10 Hot Chocolate Sales Revenue $30 Hot Chocolate Labor Payments $10 Hot Chocolate J-Type Capital Payments $20 1.1. By what percent does the rental rate to A-type capital change? To J-type capital?Click to see additional instructions 1.1: Round answers to the nearest tenth, e.g., 3.55 becomes 3.6. A-type: % J-type: 9%

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