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3. Using the classical 2 x 2 Heckscher-Ohlin setup, suppose it requires 10 units of labor...

3. Using the classical 2 x 2 Heckscher-Ohlin setup, suppose it requires 10 units of labor and 5 units of capital to optimally produce a unit of good 1, while it requires 2 units of labor and 4 units of capital to optimally produce a unit of good 2. Further suppose that the price of good 1 is $300/unit and the price of good 2 is $100/unit.

(a) Suppose the price of good 1 rises to $350/unit. What is the new equilibrium wage and rental rate?

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