2- Factor-price equalization The fictional country of Tomczakistan is.docx

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2. Factor-price equalization The fictional country of Tomczakistan is a nation that is relatively rich in capital resources. It can produce two types of goods, capita-intensive goods and labor-intensive goods. Tomcrakistan's production possiblities frontier (PPF) is shown on the foliowing graph. Currently, Tomcakistan ls closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomcrakistan is going to trade with Leightvania, a country that is relatively rich in labor and was also previously closed to intemational trade. On the following graph, use the green point (triangle symbol) to indicate which way Tomcrakistan wir adjust its productian by placing it on one of the two black points (plus symbol). Dashed droplines wil automatically extend to both axes. Once trede begins, the price or laber in Tomcrabulan In Leightvania, the pilce of tabor .

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