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Suppose there are two goods, Boats (B) and Flowers (F) and two factors

of production labor and capital which are perfectly mobile between the two sectors. Suppose the production technology for Flowers is labor intensive and Home is a capital abundant country. When Home opens up to trade:


a. The relative price of Flowers will _________ (increase/decrease). Explain.
b. The relative return to capital will __________(increase/decrease). Explain.
c. The ratio of capital to labor will __________  (increase/decrease) in _________ (both sectors/Boats sector/Flowers sector). Explain.

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Subject: Business, Economics
Suppose there are two goods, Boats (B) and Flowers (F) and two factors of production labor and capital which are perfectly mobile between the two...
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