1. Given that comparative advantage is a dynamic concept, which is likely to have greater impact...

1. Given that comparative advantage is a dynamic concept, which is likely to have greater impact on wages: technical change or trade? Why?

2. We should see worldwide convergence of prices and rents. Why don’t we?

3.Ashland is considering whether to engage in international trade in rice and furniture. The world price of rice is lower than Ashland’s “no-trade” price, but its “no-trade” furniture price is lower than the world price. Assume land is specific to rice, capital is used mainly in furniture making and labor is mobile across sectors. In Ashland, who will be in favor of trade? Who will be opposed? Explain briefly. Show on a graph what happens in the labor market.

Solutions

Expert Solution

Explanation:

Comparative advantage affect the wages as one have the better abilities or skills to carry out particular activity better than other. The individual who have comparative advantage is tend to earn more than another individual as people will go for the product which have better quality and more efficiency than another product or service.

Comparative advantage give the upper hand to individual or group to have better wage rate than others as we all know that comparative advantage of particular person gives edge over other people or group to enjoy greater wage rate.

Comparative advantages is more of technical changes than trade as technical changes can increase the comparative advantage level compared to other, comparative advantage is nothing more than technical advantage of individual or group compared to others and that gives them upper hand in market or any given trade. It’s all about having superiority over another in order to have comparative advantage and this all is due to technical changes.

Rahul Sunny answered 1 year ago

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