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1. This question is intended to further your understanding of the basic Ricardian model by having you work through a problem on your own. There are two nations, Canada and United States, and two goods X and Y . The preferences of agents in each country are represented by the following utility functions:Canada: UC(XC, Y C) = (XC)1/2(Y C)1/2U.S.: UUS(XUS, Y US) = (XUS)1/2(Y US)1/2Each country is endowed with 200 units of labor, which may be transformed into the two goods according to a fixed coefficient technology specific to each country. The technology is as follows: acLX = 2, acLY = 3, ausLX = 1 and ausLY = 4.(a) Solve for the autarky (no trade) production and consumption allocations in each country. Show your answer on a graph (separately for each country draw the PPF, and mark the production and consumption point).(b) Compute the opportunity costs for both goods in Canada and the U.S. Which country should export good X? Which country should export good Y? In what interval must the terms of trade lie?(c) Solve for the equilibrium with trade. On your graph for part (a), show the equilibrium after trade ineach country.(d) Are both countries better off after trade (be sure to explicitly explain how you know this to be trueor false)?2. This question is intended to refresh your memory with regards to the relationship between factor prices and the input choice of a profit maximizing firm.(a) A firms production function is given by X = 2(LX)(1/3)(KX)(2/3). Name three input combinations that would allow the firm to produce 100 units of output. (Hint: Set X = 100, pick a value for LX andthen solve for KX.) In each case, what is the firm's capital-labor ratio? If the wage rate (w) is 10 per unitand the rental rate on capital (r) is 20 per unit, what are the firm's costs for each of the three input combinations?(b) Solve the cost minimization problem for a firm using the values given in part (a). What is theoptimal capital-labor ratio?(c) Suppose that the wage rate increases, and the rental rate of capital remains unchanged. Does the capital-labor ratio increase, decrease or remain unchanged?
Suppose that MN Company is currently selling 300 units of Product SD per month. Management wants to increase sales and feels this can be done by cutting the selling price by $22 per unit and increasing the advertising budget by $20,000 per month. ..
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The average total cost of operating a clinic is $800 per patient if the volume is one hundred patients, and $790 each patient if the volume is 110 patients. Find the total cost at each of these two volumes?
Redstone Clayworks, Corporation is located in Sedona, Arizona and creates clay fire pits for patios. They are one of about two dozen companies around the world that produce and sell clay fire pits for retailers such as Home Depot Lowe's Front Gate
Evaluate the MU in the utility functions
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Future economic glowth
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Why does the burden of sales tax fall completely on customer when the value elasticity of demand is perfectly inelastic; the seller when perfectly elastic.
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