Question

In: Economics

Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign...

Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign country exports pomegranates (the size of Foreign is not important for this question). What would happen to the equilibrium world price of pomegranates if demand for pomegranates in the Foreign country's market increases?

a.The equilibrium world price will increase

b.The equilibrium world price will decrease

c.The equilibrium world price will not change

part2

Imagine two countries are trading flower pots. The Home country is “large” and imports flower pots. The Foreign country exports flower pots (the size of Foreign is not important for this question). Because Home is large,

a.Home welfare will always increase as a result of instituting a tariff on flower pots.

b.Home will always pay a smaller fraction of a tariff they institute on flower pots, relative to the fraction Foreign pays.

c.there exists an optimal tariff that Home can institute on flower pots that will maximize their welfare.

d.Home will always pay a larger fraction of a tariff they institute on flower pots, relative to the fraction Foreign pays.

part3

Which of the following assumptions in the Ricardian model is most responsible for the laborers' wages being equal between the cheese and wine industries?

a.Labor can move costlessly between industries

b.Labor is paid their productive value

c.There are only two goods: Cheese and Wine

d.The countries have the same homothetic preferences

Solutions

Expert Solution

Q1. Imagine two countries are trading pomegranates. The Home country is “large” and imports pomegranates. The Foreign country exports pomegranates (the size of Foreign is not important for this question). What would happen to the equilibrium world price of pomegranates if demand for pomegranates in the Foreign country's market increases?

Answer- (a) The equilibrium world price will increase

Q2. Imagine two countries are trading flower pots. The Home country is “large” and imports flower pots. The Foreign country exports flower pots (the size of Foreign is not important for this question). Because Home is large,

Answer- (c) There exists an optimal tariff that Home can institute on flower pots that will maximize their welfare.

Q3. Which of the following assumptions in the Ricardian model is most responsible for the laborers' wages being equal between the cheese and wine industries?

Answer- (c) There are only two goods: Cheese and Wine


Related Solutions

Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is...
Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is endowed with abundant capital relative to labor and hence has a comparative advantage to specialize in Cars; whereas the Foreign country is endowed with abundant labor and specializes in Rice. Once they start trading, the price of cars decreases, and the price of rice increases in the Foreign country. How would the increase in the price of rice affect the income of each of...
Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is...
Consider two countries, Home and Foreign, trading two goods, Rice and Car. The Home country is endowed with abundant capital relative to labor and hence has comparative advantage to specialize in Cars; whereas the Foreign country is endowed with abundant labor and specializes in Rice. Once they start trading, the price of car decreases, and the price of rice increases in the Foreign country. How would the decrease in the price of car affect the income of each of the...
There are two countries, Home and Foreign. The two countries are identical except that Home has...
There are two countries, Home and Foreign. The two countries are identical except that Home has a labor force of 100 and Foreign has a labor force of 200. Given this allocation of labor across Home and Foreign, the value of the marginal product of labor in Home is 30 and the value of the marginal product of labor in Foreign is 20. If labor were to be free to move, the wage in both countries would be25. fi mmigration...
There are two countries, Home and Foreign. The two countries are identical except that Home has...
There are two countries, Home and Foreign. The two countries are identical except that Home has a labor force of 100 and Foreign has a labor force of 200. Given this allocation of labor across Home and Foreign, the value of the marginal product of labor in Home is 30 and the value of the marginal product of labor in Foreign is 20. If labor were to be free to move, the wage in both countries would be 25. What...
The U.S. (Home country) and Japan (Foreign country) are trading with each other in the auto...
The U.S. (Home country) and Japan (Foreign country) are trading with each other in the auto industry. Both are large countries in this market for cars. The U.S. imports cars from Japan. The U.S. demand curve for cars is given by:             D =210 – 30P The U.S. supply curve for cars is given by:        S = 30+ 30P Japan’s demand curve for cars is given by:        D* = 50 – 10P Japan’s supply curve for cars is given...
Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each...
Consider two countries: Home and Foreign. There is one high-tech firm in each country, and each firm produces high-speed trains for both domestic consumption and exporting. The high-tech firms in both countries have been operating businesses for decades without subsidy. However, they plan to produce a new model of high-speed train, and this new model requires a large amount of fixed cost, which is equivalent to 20 times of marginal cost. Each firm has asked its government to provide subsidy,...
There are 2 countries, Home and Foreign, and 2 goods, Wine and Cheese. In each country...
There are 2 countries, Home and Foreign, and 2 goods, Wine and Cheese. In each country the are 150 workers. But not all workers are the same: some workers are cheese-makers and some workers are wine-makers. Each cheese-maker can produce one pound of cheese and zero bottles of wine, and each wine-maker can produce one bottle of wine and zero pounds of cheese. In the Home country there are 100 cheese-makers and 50 wine-makers, and in the Foreign country there...
There are two countries Home and Foreign. They can produce two goods, apples and bananas. Home...
There are two countries Home and Foreign. They can produce two goods, apples and bananas. Home has 1,200 units of labor available and Foreign has a labor force of 800. The table below contains the unit labor requirement in Foreign and Home for each of two goods. Banana Apples Home aB = 1 hour per pound aA = 2 hours per pound Foreign aB = 4 hours per pound aA = 5 hours per pound 1. Suppose that, after opening...
Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y...
Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y = 2,000, M = 400, P = 1.25; and Y* = 1,500, M* = 300, P* = 2.00. Suppose the demand for liquidity takes the same form in both countries, that is, L(R, Y) = L* (R, Y) = 2Y/100R (notice that the functions have the same form, but in each country the values of Y and R are different). (Advice: once again, don't...
Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y...
Consider two countries, Home and Foreign, with variables in Foreign denoted by asterisks ("*"). Let Y = 2,000, M = 400, P = 1.25; and Y* = 1,500, M* = 300, P* = 2.00. Suppose the demand for liquidity takes the same form in both countries, that is, L(R, Y) = L* (R, Y) = 2Y/100R (notice that the functions have the same form, but in each country the values of Y and R are different). (Advice: once again, don't...
ADVERTISEMENT
ADVERTISEMENT
ADVERTISEMENT