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[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.

3.

4.

Rahul Sunny answered 2 years ago
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