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Consider the following Ricardian model. Marginal Productivity of Labor Labor Force Butter Guns Home MPL_b=1 MPL_g=2 L=150 Foreign MPL_b^*=4 MPL_g^*=3 L^*=100 (1) Draw the PPF for the Home country. Label the slope of the PPF and the maximum outputs of butter and guns. (2) Which country has the comparative advantage in butter? Why? (3) If Home and Foreign engage in free trade, then in the free-trade equilibrium, what is the range of the price of guns relative to the price of butter? For questions (4)-(5), assume that under the free trade equilibrium,P_g^w/P_b^w=2/3; i.e. the price of guns is 2/3 of the price of butter. (4) Calculate the real wage in terms of butter in the Foreign country. (5) Show that the Home country gains from trade using the graph in (1). Specific Factors Model (10 point) 1. Assume that in addition to the mobile factor of production (labor), there are two specific factors (drylands and wetlands) to produce two goods, cactus (C) and rice. Dryland is only productive in growing cactus and wetlands can only grow rice. Suppose the world relative price of cactus is higher than the Home autarky price (frac{P_C^W}{P_R^W}>frac{P_C}{P_R}) (1) With the aid of a diagram compare the autarky and trade equilibria for cactus and rice. (2) With the aid of a diagram determine the effect of this price increase on the allocation of labor (L_C and L_R). (3) Determine the effect of this price increase on the real returns on dryland and wetland, respectively. (Hint: how do changes in L_Cand L_R affect marginal product of land?)
(Aggregate Demand and Supply) Determine whether each of the following would cause a shift of the aggregate demand curve, a shift of the aggregate supply curve, neither, or both. Which curve shifts, and in which direction
you are the manager of a California winery.then how would you expect the events to affect the market equilibrium price you receive for a bottle of wine.
Lightweight personal locator beacons are now available to hikers that make it easier for the Forest Service's rescue teams to locate those lost or in trouble in the wilderness.
Monetary Contraction Suppose the central bank wants to decrease the price level, but the economy is already at the natural rate of output.
Our economy is currently in recession so let's discuss how discretionary Fiscal Policy can help the situation. Please explain why tax cuts may be needed now and why we see budget deficits going up during the recession. What is the 'Crowding Out' e..
Owners of Sizzling Foods can earn a 14% rate of return on that land it they leased it others as a parking lot and while the last nurse hired treated 1,000 extra patients in a year. If doctors make $40,000 a year, what do nurses make?
Project labor authorization for January 2017 and What is the estimated budget for the recruitment exercise if the estimated cost of recruiting one employee during the period would be k1500.
Listen carefully to the following video and summarize the main points that he is making and to what extent is it related to Adam Smith's invisible hand
Calculate marginal cost and marginal revenue for each level of output when market price and what is the firm's profit-maximizing level of output
If you decide to use $34,000 as your working estimate of marginal costs, what increase in Custom's purchases would be necessary for the proposal not to reduce GM's profits on this account?
Discuss the relationship existing between production and cost. What is the MC function of the above TC function?
Suppose that the banking system is in reserve equilibrium. The Fed conducts an open market buy of Treasury securities in the value of $1 billion.
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