[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are...

[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are 3 factors: labor (L), capital (K), and land (T).

1) What is the slope of the production possibility frontier?

2) Graph the wage rate and the allocation of labor between the two sectors.

3) Determine the output of each sector using PPF.

4) Graphically show that the change in relative prices leads to the change in allocation of labor and output combination. And determine the relationship between the relative prices and the relative quantities supplied.

5) Explain the pattern of trade in the specific factor model with graphs.

6) Who gains and who loses from the international trade in the specific factor model?

7) Explain why international trade is beneficial to the whole country with graphs in the specific factor model.

Solutions

Expert Solution

Answer:-

1)2)

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are...

[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are 3 factors: labor (L), capital (K), and land (T). 1) What is the slope of the production possibility frontier? 2) Graph the wage rate and the allocation of labor between the two sectors. 3) Determine the output of each sector using PPF. 4) Graphically show that the change in relative prices leads to the change in allocation of labor and output combination. And determine...

[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are...

[Specific factor model] Assume that there are two goods: cloth (C) and food (F). There are 3 factors: labor (L), capital (K), and land (T). ) What is the slope of the production possibility frontier? 2) Graph the wage rate and the allocation of labor between the two sectors. 3) Determine the output of each sector using PPF. 4) Graphically show that the change in relative prices leads to the change in allocation of labor and output combination. And determine...

3. [The Standard Trade Model] There are two goods: cloth (C) and food (F). Assume that...

3. [The Standard Trade Model] There are two goods: cloth (C) and food (F). Assume that PPF is a smooth curve. Graph the relationship among production, consumption and trade on the PPF curve, when the economy exports cloth and imports food.

Consider a country that produces two goods cloth (C) and food (F) with two factors of...

Consider a country that produces two goods cloth (C) and food (F) with two factors of production: land (T) and labor (L). The technology for cloth and food are as follows. Qc= Min {1/20 L,T}, Qf= Min {1/5 L,T}, where Qc denotes the amount of cloth produced and Qf denotes the amount of food produced. Denote the wage by w and the rent of land by r. A).Suppose that the economy’s total resources are 600 hours of labor and 60...

Assume the Heckscher-Ohlin model where there are two goods, autos and cloth.

Assume the Heckscher-Ohlin model where there are two goods, autos and cloth. The home country is capital abundant while the foreign country is labor abundant. Autos are capital intensive while cloth is labor intensive. What effect does trade have on aggregate demand and supply of labor in the home country? a. The aggregate labor demand curve shifts left while the labor supply curve is unchanged b. Both the aggregate labor demand and labor supply curves shift left c. The aggregate labor demand curve...

International econ V. specific factor model The country of Riclo produces two products: Cloth and Rice....

International econ V. specific factor model The country of Riclo produces two products: Cloth and Rice. Cloth requires both Capital and Labor to produce. Rice requires both Land and Labor to produce. Riclo has perfectly competitive markets for Labor, Cloth and Rice. Riclo has 100 units of Capital, and all the Capital is used for Cloth production. Riclo has 200 units of Land, and all the Land is used for Rice production. Riclo has 1000 units of Labor, and each...

a) Assume cloth sector C is relatively more labor intensive (relative to food sector F). Show...

a) Assume cloth sector C is relatively more labor intensive (relative to food sector F). Show that C firms always devote a higher share of their total cost to labor and F firms always devote a higher share of their total cost to capital. b) In as much detail as possible, compare and contrast the specific factors model with the Ricardian model. c) Consider the transition from autarky to trade for a country with a comparative advantage in F. No...

Specific factor model: Suppose that there are two sectors in the United States: the food sector,...

Specific factor model: Suppose that there are two sectors in the United States: the food sector, with land as the specific factor, the manufacturing sector, and capital as the specific element. Labor can flow between departments. 1. Suppose a good weather makes several states have a big harvest, which leads to an 8% drop in food prices. Please elaborate and analyze the changes of labor mobility, nominal income and actual income of labor force and factor owners (please show graph)....

Two countries - home and foreign Two goods - food and cloth Explain the pattern of...

Two countries - home and foreign Two goods - food and cloth Explain the pattern of trade in the multi-good Ricardian model.

There are two goods: food F and clothing C. MRS is the marginal rate of substitution,...

There are two goods: food F and clothing C. MRS is the marginal rate of substitution, and RPT is the rate of product transformation. a) in Fredonia in autarky, MRS=6F/C and in Sylvania in autarky MRS*=2F/C. Specify a trade which makes both countries better off. b) in Gargantua in autarky RPT=4F/C and in Lilliput in autarky RPT*=10F/C. Specify a reallocation of production across countries such that the output of both goods rise.

Subjects