For questions below consider the following specific factors model. Vietnam and Thailand produce beans and trucks. Labor is the mobile factor (i. e. labor is used in the production of both goods). The specific factor for beans is land, and the specific factor for trucks is capital. Under the closed-economy equilibrium the relative price of beans with respect to trucks is lower in Thailand than in Vietnam (i. e. under closed economy PbeansThailand/PtrucksThailand < PbeansVietnam/PtrucksVietnam). Are the following statements True or False and provide brief explanation.
For questions (4)~(11) below, consider the movement from closed economy to free trade.
(4). The opportunity cost of trucks (in terms of beans) increases in Vietnam.
(5). Labor employment for beans decreases in Vietnam.
(6). The marginal product of labor for trucks increases in Vietnam.
(7). The capital owners’ purchasing power for beans increases in Vietnam.
(8). The real rental rate of land for beans increases in Vietnam.
(9). The real wage for beans increases in Vietnam.
For questions (10)~(11) below, assume that as Vietnam goes from closed economy to free trade, the price of trucks remains unchanged, and the price of beans decreases by 10%. Are the following statements True or False and provide brief explanation.
(10). The nominal wage decreases by more than 10% in Vietnam.
(11). The rental rate of capital increases in Vietnam.