ANSWER:-
A).
- It is a simple example of trade off. Normally there are two
types of goods that are produced in a particular country. One is
capital intensive goods and another is labour intensive goods. The
situation describes that at the home countries labour charges is
more than the foregin countries.
- So in trade off it will be optimal solution to produce more
capital intensive goods so that the overall production cost can be
minimised. At the same time other countries will produce more
labour intesive goods.
- And hence by trading between both the countries, will be in
favourable stage.
For example if country A has the absolute advantage of producing
car because of of its lower capital cost and the country B has the
absolute advantage of producing wheat because of lower labour cost
then by trading both the countries will be in winwin stage.
B).
- If there is a imposition of tariff then the cost of import will
be increased.
- Now keeping this situation if the cost of imported goods
becomes more costly then the goods produced in home country then
the country will decrease the imports but if bodha cost equal then
it is up to the countries decision whether to produce more goods in
home country or to import.
C).
By producing more capital intensive goods the demand of labour
will be decreased in home country and the wages well also be
decreased. Similary by producing more labour intensive goods the
demand of labour in foreign countries will raise and the wages of
labour will be increased.
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