Home has 100 units of labor that are specific to the production of R&D, and 25...
Fantastic news! We've Found the answer you've been seeking!
Question:
Transcribed Image Text:
"Home" has 100 units of labor that are specific to the production of R&D, and 25 units of labor that are specific to the production of components; there are 100 units of capital that can be allocated either to R&D or to components. The production function is QC =L^(1/2)K^(1/2) for components and QR=L^(1/2) K^(1/2) for R&D; final goods produced from components and R&D according to the function Y =Q^(1/2)Q^(1/2). a) Write down an expression for the PPF for components and R&D in this country. Compute the "autarky" (or "no-offshoring") equilibrium production of components, R&D, and final goods, and the allocation of capital between components and R&D. If each unit of components is worth $10, then what is the price of a unit of R&D in this equilibrium? Illustrate your results with a PPF-isoquant diagram. b) Now suppose R&D and components are traded on international markets at equal prices (i.e. PC = PR =1). Solve for the equilibrium under offshoring: compute the domestic production of components, R&D, and final goods, and the domestic allocation of capital in this equilibrium. Show the new equilibrium in your diagram from part a (or in a new PPF-isoquant diagram). c) How does offshoring affect the earnings of each unit of capital and of each type of labor in this economy? To be numerically precise, you can assume that offshoring causes the price of one intermediate good to rise while the other one remains the same. d) In the spirit of Samuelson, discuss in words how this country would be affected by changes in the terms of trade (i.e. fluctuations in PC/PR) once offshoring has begun. "Home" has 100 units of labor that are specific to the production of R&D, and 25 units of labor that are specific to the production of components; there are 100 units of capital that can be allocated either to R&D or to components. The production function is QC =L^(1/2)K^(1/2) for components and QR=L^(1/2) K^(1/2) for R&D; final goods produced from components and R&D according to the function Y =Q^(1/2)Q^(1/2). a) Write down an expression for the PPF for components and R&D in this country. Compute the "autarky" (or "no-offshoring") equilibrium production of components, R&D, and final goods, and the allocation of capital between components and R&D. If each unit of components is worth $10, then what is the price of a unit of R&D in this equilibrium? Illustrate your results with a PPF-isoquant diagram. b) Now suppose R&D and components are traded on international markets at equal prices (i.e. PC = PR =1). Solve for the equilibrium under offshoring: compute the domestic production of components, R&D, and final goods, and the domestic allocation of capital in this equilibrium. Show the new equilibrium in your diagram from part a (or in a new PPF-isoquant diagram). c) How does offshoring affect the earnings of each unit of capital and of each type of labor in this economy? To be numerically precise, you can assume that offshoring causes the price of one intermediate good to rise while the other one remains the same. d) In the spirit of Samuelson, discuss in words how this country would be affected by changes in the terms of trade (i.e. fluctuations in PC/PR) once offshoring has begun.
Expert Answer:
Answer rating: 100% (QA)
c The effect of offshoring on the earnings of capital and labor in an economy can vary depending on several factors In this case lets assume that offshoring leads to an increase in the price of one in... View the full answer
Related Book For
Business research methods
ISBN: 978-1439080672
8th Edition
Authors: William G Zikmund , Barry J. Babin, Jon C. Carr, Mitch Griff
Posted Date:
Students also viewed these economics questions
-
Evaluate the following survey designs: (.a) A shopping mall that wishes to evaluate its image places packets including a questionnaire, cover letter, and stamped return envelope in the mall where...
-
Evaluate the following survey designs: a. A text-message survey asking the potential respondent to indicate with yes or no responses whether they are driving or not, whether they are alone, whether...
-
Evaluate the following survey designs: a. A researcher suggests mailing a small safe (a metal file box with a built-in lock) without the lock combination to respondents, with a note explaining that...
-
If you place a charged object next to an uncharged object thatis a conductor, If you place a charged object next to an uncharged object thatis a conductor, A) The force depends on whether the charge...
-
Barium metal crystallizes in a body-centered cubic lattice (the Ba atoms are at the lattice points only). The unit cell edge length is 502 pm, and the density of the metal is 3.50 g/cm3. Using this...
-
On aging for longer times, why do the second-phase precipitates grow? What is the driving force? Compare this with driving forces for grain growth and solid-state sintering.
-
You need to understand the approach described in question 3 in More Genetic TIPS before answering this question. A gene that is normally expressed in pancreatic cells was cloned and then subjected to...
-
At December 31, 2010, Jimenez Company reported the following as plant assets. During 2011, the following selected cash transactions occurred. April 1 Purchased land for $2,130,000. May 1 Sold...
-
The ACA expanded insurance coverage by creating health care exchanges or marketplaces. These were intended primarily for individuals that could not gain insurance through their employer. What was the...
-
Kofi Allon, who is 32 years old and single, is employed as a technical consultant for a large electronics distributor. He lives at 678 Birch Street, LaMesa, CA 91941. Kofi's Social Security number is...
-
Enterprise resource planning ( ( ERP ) ) e - commerce functionality has been steadily growing in importance as online businesses flourish, and brick and mortar retailers become less prominent....
-
The position of a particular particle as a function of time is given by 7 = (- 4.0t + 5.0t2 +5tk)m, where t is in seconds. Part A What is the instantaneous velocity at 2.00 s? Express your answers...
-
In an isolated environment, a positive charge (QA) is released so that it is free to move near a fixed position positive charge qB. As q moves away from qB, what is true of qA's motion? As it moves,...
-
A hydraulic lift has two pistons, large (d=300mm) and small (d=15mm). A force of 500 N is exerted on the small piston. What is the resulting force on the large piston, which is used to move the load?...
-
N m' (i) For the purpose of an experiment, a 2.6 kg block is placed on a frictionless plane inclined at 45 with the horizontal. The block is pushed against a massless spring with a spring constant of...
-
A charge of q = +7.73 C is located point are Ex = 5.57E+3 N/C and Ey charge? Submit Answer Tries 0/10 in an electric field. The x and y components of the electric field at this 8.20E+3 N/C,...
-
Given that, sec(0) = 3 and 3 t determine the exact values of the trigonometric functions below. Choose the correct match. cos (8) <0 <2, sin(8) 1. 6 3 3.-22 2. 3 3 4. --/m
-
What is an access control list?
-
Suppose a GIS research firm is approached by the state legislature and asked to provide data about vehicle movement within the state for all cars with a satellite tracking mechanism. Based on the...
-
Suppose you are the research director for your states tourism bureau. Assess the states information needs, and identify the information you will collect in a survey of tourists who visit your state.
-
Evaluate the following statements of business research problems. For each provide a decision statement and corresponding research objectives: a. A farm implement manufacturer: Our objective is to...
-
Test the overall significance of a regression model and identify the components of this test from your computer output.
-
Identify the sample.
-
Based on the strategy, what type of sampling technique will be used to identify the sample? a. Why did you choose this type of technique?
Study smarter with the SolutionInn App