Business, 10.03.2020 08:05 itorres40

Consider a specific factor model of international trade. There are two sectors: manufacturing and agriculture. Labor is mobile between these two sectors but capital is speciÖc to manufacturing and land is speciÖc to agriculture. The production function of manufacture is subject to diminishing marginal productivity with respect to labor (given Öxed capital). Similar assumption is made with respect to the production function of agriculture with Öxed land input. All markets are competitive.

a. Given output prices pm; the price of manufacture and pa; the price of agriculture, explain how the wage is determined in this economy by using a graph.
b. Suppose the international price of manufactures, increases by 10% and that of food increase by 5%. What can you say about the resulting change in the wage rate? Justify your answer with a graph?
c. In b: does the welfare of labor change unambiguously? Justify your answer.
d. In b: what can you say about the welfare change of capital owners? Explain your answer precisely.
e. In b: what can you say about the welfare change of land owners? Explain your answer precisely.
f. Suppose the home and foreign country share the same homothetic preferences but the home countryís relative supply curve of cloth/food (as a function of pC =pF ) lies to the right of the relative supply curve of the foreign country(namely, C F > C F at each pC =pF After trade begins, how would the relative price of home country respond? Which good would the home country export? Answer using a graph.

Answers: 3

Show answers

Another question on Business

Business, 21.06.2019 21:00

The market for corn in country a is highly competitive. at the current market price of $5/bushel there is a shortage of 100,000 bushels of corn in this country. media reports claim that the price of corn will rise drastically in the near future. according to these reports, the neighboring country b had witnessed a similar situation recently. at the same price, the shortage in country b was also 100,000 bushels and eventually the equilibrium price in b went up to $10/bushel. both countries are known to have equal number of corn producers and the market supply of corn is identical at all prices. this, combined with the fact that consumers in the two countries also have similar tastes and preferences, led the media to conclude that the price of corn in country a would soon be as high as $10/bushel. the new equilibrium price turns out to be below $10/bushel, what inferences can be drawn?

Answers: 3

Answer

Business, 22.06.2019 13:30

1. is the act of declaring a drivers license void and terminated when it is determined that the license was issued through error or fraud.

Answers: 2

Answer

Business, 22.06.2019 18:00

Acountry made education free in mandatory up to age 15. it is established 100 new schools to educate kids across the country. as a result, citizens acquired the _ required to work. the school's generated _ for teachers and other staff. in 20 years, to countryside rapid _ and its gdp.

Answers: 3

Answer

Business, 22.06.2019 23:40

Gdp has grown in a country at 3% per year for the last 20 years. the labor force has grown at 2% per year and the quantity of physical capital has grown at 4% per year. a 1% increase in average physical capital per worker (other things equal) raises productivity by 0.3%. average education has not changed. how much has growing physical capital per worker contributed to productivity growth in this country? choose the correct answer from the following choices, and then select the submit answer button. answer choices 0.3% 0.6% 3.0% 6.0%

Answers: 1

Answer

You know the right answer?

Consider a specific factor model of international trade. There are two sectors: manufacturing and ag...

Questions