• Suppose there are two countries, Japan and the Philippines, described by a variable proportions H-O model (i.c.a H-O model). Suppose they produce two goods, rice and chicken, using two factors, labor, and capital. Let rice be capital-intensive and the Philippines be labor abundant.
• a) If these are the only two countries and if they do not trade, explain how the price of rice and chicken will differ between the two countries.
• b) If these are the only two countries and if they do not trade, explain how the wages and rental rates on capital will differ between the two countries.
• c) When trade opens between the countries what happens to the price of rice and chicken in the Philippines?
• d) When trade opens between the countries what happens to the wages and rents in the Philippines?
• e) When trade opens between the countries what happens to the wages and rents in Japan?
• f) When trade is free between the two countries, how do the wages and rents compare between the two countries?
  
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Answer rating: 100% (QA)

a ANS WER In the absence of trade the price of rice will be higher in the Philippines than in Japan while the price of chicken will be higher in Japan ... View the full answer