Below graph presents relative price of goods X and Y, relative price of factor(l

Question

Below graph presents relative price of goods X and Y, relative price of factor(labor and capital), and ratio of factor which is needed to produce goods X and Y and initially exists in country A and B(relative demand of capital and factor endowments).

In this graph, it seems to be possible to presume some assumption such as

1) Country A is labor abundant and B is capital abundant.

2) Good X is labor-intensive and Y is capital-intensive.

The problems are,

1) Where would be a proper point represents production point of X in country A when it specialize in X?

2) Where would be a proper range represents relative price of factor when country A is in imperfect specialization?

3) Where would be a proper point represents relative price of X when there is no international trade?

In 1), is it the intersection point of straight line X and dotted line from A?

The word 'production point' is somehow ambiguous so that i have confused what exactly it is.

In 2), is it the red range in vertical axis? I guess if country A produces both of them the aggregate relative demand of capital curve should be between the two curves X and Y.

In 3), is it the red range in the left horizontal axis? If my guess in 2) is correct, such range seems to be reasonable answer...but i have no confidence.

Explanation / Answer

Yes you have mentioned the correct answers.

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