Assume a Heckscher-Ohlin model of trade. Alpha (A) and Beta (B) produce two goods pipes (P)...

 

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Assume a Heckscher-Ohlin model of trade. Alpha (A) and Beta (B) produce two goods pipes (P) and cars (C). Alpha is relatively capital abundant. Let the diagram below represent the relative demand for labor in each industry. -le вс >L K a. Which industry is capital intensive? Explain your answer. b. Given relative factor endowments which country has a higher w/r in autarky? c. Which country uses more capital-intensive techniques of production in autarky? Does this make economic sense? Now assume that countries are free to trade. d. What happens to the techniques of production of Alpha going from autarky to free trade? Assume a Heckscher-Ohlin model of trade. Alpha (A) and Beta (B) produce two goods pipes (P) and cars (C). Alpha is relatively capital abundant. Let the diagram below represent the relative demand for labor in each industry. -le вс >L K a. Which industry is capital intensive? Explain your answer. b. Given relative factor endowments which country has a higher w/r in autarky? c. Which country uses more capital-intensive techniques of production in autarky? Does this make economic sense? Now assume that countries are free to trade. d. What happens to the techniques of production of Alpha going from autarky to free trade?

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a Since more amount of labor is required in car industry it i... View the full answer