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（True or False questions, please provide reasons) Consider the following Heckscher-Ohlin model. France and Italy produce...

（True or False questions, please provide reasons) Consider the following Heckscher-Ohlin model. France and Italy produce wine and bread. Bread is capital intensive, while wine is labor intensive. France is capital abundant, while Italy is labor abundant. consider the movement from closed-economy to free trade

(1) French workers’ real wage for bread increases.

(2). The real rental rate of capital for wine increases in Italy.

(3). The relative demand for labor increases in France.

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Answer #1

(1) French workers’ real wage for bread increases. this statement is false because as france will specialise in the production of bread his demand for capital will increase not for labour so rent will increase and not wage.

(2). The real rental rate of capital for wine increases in Italy. this statemnet is flase because as itally will specialise in wine production the wage rate will incease and not the rental.

(3). The relative demand for labor increases in France. this statement is false because the relative demand for capital will increase after trade and not for demand.

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