5. a. Western Europe is capital abundant, Eastern Europe is labor abundant; manufacturing is capital intensive...

5. a. Western Europe is capital abundant, Eastern Europe is labor abundant; manufacturing is capital intensive (X) and agriculture (Y) is labor intensive. Assume also that tastes in Western and Eastern Europe is unbaised and that labor and capital is mobile between manufacturing and agriculture within each region. Illustrate everything on the trade diagram for both regions with pre trade, post trade price ratios! Write down the pre trade and post trade production and consumption points and the pattern of trade as well, including the trade triangles!

What would be the effect of opening trade on the return to capital and wages in Western Europe in the medium run (Stolper Samuelson)? What is the effect on the purchasing power of the labor and capital groups?

Solutions

Expert Solution

Rahul Sunny answered 1 year ago

Next > < Previous

Related Solutions

Suppose that a relatively capital-abundant country is exporting the capital- intensive good and importing the labor-intensive...

Suppose that a relatively capital-abundant country is exporting the capital- intensive good and importing the labor-intensive good, but that the “specific- factors” model of Chapter 8 applies rather than the Heckscher-Ohlin model. Assess the effect on the return to labor of the imposition of a tariff on the labor- intensive good.

Suppose there are two countries (a capital-abundant country and a labor-abundant country) and two goods (labor-intensive...

Suppose there are two countries (a capital-abundant country and a labor-abundant country) and two goods (labor-intensive good X and capital-intensive good Y). The two countries have identical demand for the two goods and are considering forming a free trade agreement. However, while this agreement received support from most voters in country A, many voters in country B were concerned that the agreement will likely widen income inequality in country B. Please identify which country is likely labor abundant and which...

Australia - Land Abundant India - Labor Abundant Wheat - Land intensive Textiles - Labor Intensive...

Australia - Land Abundant India - Labor Abundant Wheat - Land intensive Textiles - Labor Intensive Explain why both the countries will have different prices in an Autarky?

Suppose that there are two countries; Country 1 and Country 2. Country 1 is capital abundant and country 2 is labor abundant. X is capital intensive and Y is labor intensive.

Suppose that there are two countries; Country 1 and Country 2. Country 1 is capital abundant and country 2 is labor abundant. X is capital intensive and Y is labor intensive. Assume that Country 1 is a large country and country 2 is a small country.Answer the following questions:a) Suppose that Country I's capital stock increases. Show the pregrowth and after growth production and consumption points on a figure. Clearly explain how the production and consumption of commodity X and...

Suppose that a Home country is a labor-abundant country, and produces bananas (labor intensive) and computers...

Suppose that a Home country is a labor-abundant country, and produces bananas (labor intensive) and computers (capital intensive). Given all the theory and assumptions of the Heckscher-Ohlin model holds true, answer the following questions: A). Draw and explain in a graph the free trade equilibrium for Home Country (Remember PPFs? Make sure to clearly indicate the production point, the consumption point, and the quantity of exports and imports). B). In the graph drawn above for question (a), show the effects...

Suppose that a Home country is a labor-abundant country, and produces bananas (labor intensive) and computers...

Suppose that a Home country is a labor-abundant country, and produces bananas (labor intensive) and computers (capital intensive). Given all the theory and assumptions of the Heckscher-Ohlin model holds true, answer the following questions: A). Draw and explain in a graph the free trade equilibrium for Home Country (Remember PPFs? ! Make sure to clearly indicate the production point, the consumption point, and the quantity of exports and imports). B). In the graph drawn above for question (a), show the...

The US is a capital abundant country, and Mexico is a relatively labor abundant country. Assume...

The US is a capital abundant country, and Mexico is a relatively labor abundant country. Assume that each country has an apparel industry (labor-intensive) and an automobile industry (capital-intensive). Assume that the two countries are originally in a state of autarky. a) Use PPFs to show the outcomes in autarky. b) Use the Heckscher-Ohlin-Samuelson (HOS) model to show what will happen when we open up the two countries to free trade with one another. c) What will happened to the...

1.) The US is relatively capital abundant, and India is relatively labor abundant. Assume that the...

1.) The US is relatively capital abundant, and India is relatively labor abundant. Assume that the production of rice is more labor intensive than the production of cars. Suppose there are foreign direct investment (FDI) flows from the US to India,and the FDI is in the car industry. Answer the following questions. a.Explain short-run and long-run effects of the FDI on India's pattern of production, imports and exports. b.How will you answer in Part (a) change if the FDI from...

What are the main products that the U.S. exports? Capital intensive goods. Labor intensive goods. Textiles,...

What are the main products that the U.S. exports? Capital intensive goods. Labor intensive goods. Textiles, shoes, electronics Coffee, dairy products, furniture Question When the overall trade balance is zero: Exports equal imports Net exports equal zero. There is no trade surplus or trade deficit. All of the above. Question What is the best argument in favor of free trade? Aiding infant industries. Higher consumption possibilities. All participants in international trade gain a higher standard of living. An decrease in...

380 Global Economy Consider a world comprised of a capital-abundant developed country (H) and labor-abundant developing...

380 Global Economy Consider a world comprised of a capital-abundant developed country (H) and labor-abundant developing country (F). Both countries produce perfectly competitive agriculture (A) and manufacturing (M) sectors, which are labor (L) and capital (K) intensive, respectively. Each sector uses both factors for production, and those factors are substitutable. Demand structure is the same across the countries. The amount of factor “used” for each sector is given by Aka, Ala, Akm, and Alm. For other variables needed, use superscript...

Subjects