Assume that a given country produces Tuaca and avocados. Using the specific factors model, discuss the...

Assume that a given country produces Tuaca and avocados. Using the specific factors model, discuss the income distribution effects that follow from an increase in the price of Avocados. Use a graphical framework in your answer.

Expert Solution

Rahul Sunny answered 1 year ago

The country of Freedonia produces cars and avocados using capital, which is specific to cars; land,...

The country of Freedonia produces cars and avocados using capital, which is specific to cars; land, which is specific to avocados; and labor, which is mobile between the two sectors. Freedonia has 100 workers, 100 units of capital and 400 acres of land. We assume our framework to be the “Specific-Factors Model”. a) Define the marginal product of labor and the marginal product of land in the avocado sector. [4 marks] b) Draw the production possibilities frontier for Freedonia with...

Discuss the differences and similarities between the Ricardian model and the specific factors model

According to the Ricardian model and the Specific Factors model, cross-country trade would not wipe out...

According to the Ricardian model and the Specific Factors model, cross-country trade would not wipe out cross-country inequality in income. Why?

Consider the specific factors model. In the country Youland, two goods are produced: degrees (d) and...

Consider the specific factors model. In the country Youland, two goods are produced: degrees (d) and fun (f). Both goods are produced using a combination of labour and a specific factor for each good. The specific factor for degrees is ability (a) while the specific factor for fun is games (g). Both goods are produced with diminishing returns, as is standard. Explain why, in equilibrium, the absolute value of the slope of the PPF must equal the relative price of...

Question: (45 marks) Consider the specific factors model. In the country Youland, two goods are produced:...

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