Question: 2. Consider two countries, Here and There. Assume Here is capital abundant and There is labor abundant. Each country has the same two industries, computer

2. Consider two countries, Here and There. Assume Here is capital abundant and There is labor abundant. Each country has the same two industries, computer manufacturing, which is capital intensive and shoe manufacturing which is labor intensive. Both countries are initially in autarky and each country has a fixed supply of labor and capital, but labor and capital may move freely from one industry to another within each country. Explain your answers. (20 pts.) a. From There's viewpoint will the relative price of shoes increase or decline once international trade between the two is introduced? Why? b. Will There's w/r increase or decrease once trade is introduced? Why? c. Draw a chart similar to figure 4.13 in the text for There that shows the effects of the change in the relative price of computers on There's wage to rental ratio and labor to capital ratio. 1. An increase in the relative price of computers shifts the relative demand curve from li'D1 to R0,. Wage/ rental 2. The relative wage decreases from (W/R)1 I g to (W/R)2. ..... ; ............... ' ...... _ (W/R)1 I """ ; Feenslra/'laylor, international Economics, Se 5 , 2021 Worth Publlshers 3 5 Lc/Krl : ': #2 (LC/K[)1 (Lg/K82 (Ls/[(5)1 (Ls/[(5)2 Labor/capital 3. At the new relative wage, the laborcapital ratio in each industry increases. FIGURE 4-13 Effect of a Higher Relative Price of Computers on Wage/Rental An

Step by Step Solution

There are 3 Steps involved in it

1 Expert Approved Answer

Step: 1 Unlock blur-text-image

Question Has Been Solved by an Expert!

Get step-by-step solutions from verified subject matter experts

Step: 2 Unlock

Step: 3 Unlock

Students Have Also Explored These Related Economics Questions!

2. Consider two countries, Here and There. Assume Here is capital abundant and There is labor abundant. Each country has the same two industries, computer manufacturing, which is capital intensive...

Consider two countries, Here and There. Assume Here is capital abundant and There is labor abundant. Each country has the same two industries, computer manufacturing, which is capital intensive and...

-to-date with security updates, fixes, and improveme 2 4 S AGEC 3300 Midterm Exam N1 Part Two: Problems and Discussion Questions Question 1. The PPF for Canada is shown in Figure I which describes...

can you explain this briefly and easy to understand please. TWO 1 LABOR- INTENSIVE TECHNOLY- utilizes more labor resources than capital resources. It usually employed by economies where labor...

Hello tutors, I need help. Be detailed You are given the task of calculating the cost of capital of N Corp. The company faces a tax rate of 40%. The company has 200,000 common shares and 50,000...

The leading trading partner (most favorite) in international trade for the United States is-----. One of the most closed economies of the world is----- Group of answer choices Canada, North Korea...

1. Assume that a country is endowed with equal amounts of K and T. Prices are Px = Py = $2 and the country's total labor force is L =300= Lx + Ly. Labor is fully mobile between the two sectors. K is...

PART A: MULTIPLE CHOICE QUESTIONS Each Question is worth 2 marks (40 Marks Total) Use the following Scenario to answer Questions 1-2: Consider two countries, Australia and New Zealand, in a H-O...

1. There are 40 units of labor in Japan and 75 units of labor in Taiwan. There are 20 units of land in Japan and 5 units of land in Taiwan. You are given the following information about production...

Explain two methods of designing monitoring information systems and the scenario in which each can be applied

Suggest some solutions to this problem. Youve probably heard of some specific heart procedures, such as angioplasty and stents, that are routinely performed on adults. But such heart procedures,...

Screen size is measured _ _ _ _ _ _ from one corner of the screen to the other

Studies on a machine that molds plastic water pipe indicate that when it is injecting 29.31 mm diameter pipe, the process standard deviation is 0.45 mm. The pipe has a specification of 29.31 mm plus...

4. In the next communication situation you are in, already think through three different communication strategies, which will make you achieve greater flexibility. Then practice on these as soon as...

2. Now imagine a real situation in your workplace or home situation where someone gives you feedback. a. Did you perceive the feedback as a hidden criticism? b. Did you perceive the feedback as a...

2. In this chapter, the reader should reflect on the following concepts: feedback and flexibility as a basis for change, intention and communication as a basis for change and behavioural patterns as...