1. Assume that the assumptions of the Heckscher-Ohlin model are
holding. There are two inputs, labor and capital. There are two
goods, automobiles and clothing. Automobiles are capital-intensive,
and clothing is laborintensive. Assume that Canada is the
relatively capital abundant country. Answer the following questions
about the effect of trade on Canada:
a. As it begins to trade, which good will Canada export, and
which good will Canada import?
b. What will happen to the price of automobiles and the...