Comparative Advantage Models Suppose two products are being produced in the US, auto and wheat. Labor...

Comparative Advantage Models

Suppose two products are being produced in the US, auto and wheat. Labor is the mobile factor used in both productions. Capital and Land are two specific factors.

1) Draw the butterfly graph four all four markets (product market, productions, and labor market) and clearly label all four axes.

2) Explain why the PPF is curved in the Specific Factors model.

3) Will the PPF curve be a straight line for HO model?

Expert Solution

Rahul Sunny answered 8 months ago

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