Question
In: Economics
There are two countries, Home and Foreign, each producing only one good by using labor and...
There are two countries, Home and Foreign, each producing only one good by using labor and capital. The supply and the quality of labor as well as the technology of production are identical in both countries and labor mobility between the countries is not allowed. The marginal productivity of the 1st unit of capital used is 20 whereas the marginal productivity of the 9th unit is 12 and there is a linear relation between the marginal product of capital and the amount of capital used. Initially, there are 11 units of capital used in Home and 3 units of capital used in Foreign. Assume competitive markets and normalization such as p=1€ in both countries.
a) Derive and draw the linear function for the marginal product of capital.
b)Find the effect of free capital mobility on capital utilization, production, the rental price of capital, and the income of workers in both countries by the situations before and after capital mobility.
Solutions
Rahul Sunny answered 2 years agoRelated Solutions
There are two countries Home and Foreign. Home has 1,200 units of labor available. It can...
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Home has 1,200 units of labor available. It can produce two
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Suppose there are two countries – Home and Foreign – that produce only coffee and sugar....
Suppose there are two countries – Home and Foreign – that
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Foreign country is less productive – their workers spend seven
hours to make a bag of coffee and a half of a day (twelve hours!)
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1. Which country has an absolute advantage in coffee? Sugar?
Explain...
Consider international trade in a world with two countries, Home and Foreign, and a single good....
Consider international trade in a world with two countries, Home
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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...
Consider two countries (Home and Foreign) that produce goods 1 (with labor and capital) and 2...
Consider two countries (Home and Foreign) that produce goods
1 (with labor and capital) and 2 (with labor and land).
Initially, both countries have the same supply of labor
(100 units each), capital, and land. The capital stock in Home
then shrinks.
This change shifts in both the production curve for good 1 as a
function of labor employed and the associated marginal product of
labor curve. Nothing happens to the production and marginal product
curves for good 2.
a....
Consider two countries (Home and Foreign) that produce goods 1 (with labor and capital) and 2...
Consider two countries (Home and Foreign) that produce goods 1
(with labor and capital) and 2 (with labor and land) according to
the production functions q1 = L10.5K0.5 and q2 = L20.5T0.5 where Li
is the labor input in sector i = 1, 2, K is capital, and T is
land.
a. Suppose there is capital inflow from the foreign country so
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labor in sector1. (If you do not...
Consider two countries, Home and Foreign. Home’s demand for sugar is ??/d =60,000−400?. Home not only...
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sugar is ??/d =60,000−400?. Home not only produces sugar
domestically, but also imports sugar from Foreign. Home’s supply of
sugar is ? ?/s=20,000+500 ? and Foreign’s supply of sugar to Home
is ? ?/s =20,000+100?.
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In Home and Foreign, there are two factors each of production, land and labor, used to...
In Home and Foreign,
there are two factors each of production, land and labor, used to
produce only one good. The land supply in each country and the
technology of production are exactly the same. The marginal product
of labor in each country depends on employment as follows:
Number of Workers
Employed
Marginal Product of
Last Worker
1
20
2
19
3
18
4
17
5
16
6
15
7
14
8
13
9
12
10
11
11
10
Initially,...
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