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Suppose that country A produces two goods (a labor-intensive good X, furniture, and a capital-intensive good...

Suppose that country A produces two goods (a labor-intensive good X, furniture, and a capital-intensive good Y, autos) and is considering to form a free trade agreement with one of its trading partners. The future free trade agreement is strongly opposed by labor unions in country A.

  1. Could you infer which type of country (namely, capital or labor abundant) country A and its trading partner are, respectively?
  2. What would happen to the two countries’ w/r ratios (the ratios of wage rate relative to capital rental rate) after the formation of the free trade agreement?
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