Question 5 - Comparative advantage and returns to scale [15 points] (a) [5] Explain the similarities and differences in how the concept of comparative advan- tage appears in the Ricardian and Heckscher-Ohlin (H-O) models. (b) [5] The Ricardian and Heckscher-Ohlin models predict that: (1) Two countries are more likely to trade more if they are different; and (2) Countries gain from trade by specializing (completely or incompletely) in different industries. Are these two predictions broadly consistent with data on international trade? (c) [5] Consider a world with a total of one million people (labor) and one million ma- chines (capital). There are two countries in this world. For the H-O model and for the Krugman model, provide a ranking of the three scenarios by the volume of international trade predicted by each model, and explain your answers. [For the Krugman model, suppose a machine and a person are interchangeable]. 1. Each country has half a million people and half a million machines. 2. There is a big country and a small country. The big country has twice as many people and twice as many machines as the small country. 3. One country has twice as many machines and half the number of people as the other country.