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Suppose that each unit of product A requires 4 workers and 1 unit of capital to produce, whereas each unit of product B requires 5 units of capital and 2 workers and that it is the case irrespective of prices (no factor substitution). All the other assumptions of the Heckscher-Ohlin model are satisfied. Suppose that in autarky the wage and rent each equal 100 in the England while in France the wage is 90 and the rent is 120.
(i) What does this indicated about the relative factor abundance of the two countries. Explain.
(ii) Suppose that England and France enter into free trade. The international price of product A is 550 and that of product B is 770. Both countries continue to produce both goods. What is the wage rate and the rental price in free trade? Show computations to get your answer.
What do you think will cause market fluctuations over the next few years as the economy struggles to recover? What areas of the economy should be closely watched as indicators of future activity?
Why does the concept of money neutrality imply that monetary policy to stimulate investment will be ineffective in the long run?
Uncertainty and Insurance: You own a house and have a utility function equal to in which x1 represents your total wealth in a state of nature in which your house is still standing, and x2 represents your total wealth in a state of nature in which you..
Compared with a drip system, a new type of infusion pump reduces the cost of administrating chemotherapy from $25 per dose to $20 per dose. The complication rate of each system is two percent. Which should you choose? What sort of analysis should you..
Explain why is it important to take into account changes in the participation rate and in the ratio of full to part time employment in assessing the economic and social impact of changes in the unemployment rate.
If the current price of its product is $80 also there is no change in quantity if price is increased, illustrate what must the new price be to achieve the goal.
Suppose she is offered a new job that would pay her $15,000 and would bring her earnings high enough so that she no longer qualified for any welfare benefits.
Business its legal, ethical, and global environment 10th edition chapter 6 QP 2, page.204 what process must the CPSC follow to promulgate the rules? What do you think of the consumer group head's statement? Will that statement alone justify the rulem..
Many professional sports athletes have incentive clauses in their contracts. These indicate tha: a) the team owner has asymmetric information b) the athlete might engage in moral hazard, which the team owner wishes to avoid. c)the athlete might engag..
Representative consumers have the utility function U(C,Ls) = log(C) + log(1- Ls). There is perfect competition in the markets (so price and wages are taken as given by firms and consumers) Write down the budget constraint of the representative consum..
If the marginal cost is a constant of 6, would that mean it is an economy of scale or diseconomy? My first thought was that it would be a diseconomy since I thought MC needed to approach zero for very large quantitities.
In the 1950s, imports and exports of goods and services constituted roughly 4% to 5% of U.S. GDP. In recent years, exports have accounted for approximately 12% of GDP, while imports have more than tripled to over 15% of GDP. International trade agree..
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