Q2. Assume Home and Foreignm are both able to produce and consume the following
ID: 1147147 • Letter: Q
Question
Q2. Assume Home and Foreignm are both able to produce and consume the following four goods in autarky according to unit labor requirement provided below Home Unit Labor Requirement Foreign Unit labor Requirement 12 Good 4 15 30 A. In which good does Home have the greatest relative productivity advantage? In which good does Home have lowest productivity advantage? (1 point) Home? What goods will be produced by Foreign? (1 point) how patterms of specialization. (1 point) B. If the Home wage rate is 10 times the foreign rate, what goods will be produced biy C. Draw the relative labor supply andlabor demand in the wold labor market and show D. Iftrade takes place, show howit is beneficial to each country. (1 point) E. Would this patterm of specialization and trade change if the relative wage were w/w*-9? What would be thenewpatterm? (1 point) ActivaExplanation / Answer
The home country have the greatest advantage in A.(1 vs 12).The country has least advantage in D(1vs 15 or 2vs 30)
2 A will be produced by (1.10=10 versus 12).others B, C, D will be produced by others
3) incomplete question. Can't answer
4 Suppose there are twelve hours available for work. Home country can produce 12 units of A and foreign can produce 24/30 multiplied by 12=9 units of B. Now home can sell 6 units to FOREIGN. IN RETURN IT CAN GET 9 UNITS OF D FROM FOREIGN. THE GAIN IN foreign = 6 units of A and gain in home country is 9-7.5(7.5 is derived from 15/2)=1.5 units
of D
4 No home will continue to produce A and foreign D. The only change is both can produce B with equal efficiency
Related Questions
Navigate
Integrity-first tutoring: explanations and feedback only — we do not complete graded work. Learn more.