Suppose that the world consists of two countries the United States and Uzbekistan with a total combined of capital of $20*ID. Of this capital stock, $16*ID belong to United States and $4*ID belong to Uzbekistan. The VMPK_us and VMPK_uz  curves give the value of the marginal product of capital in the United States and Uzbekistan, respectively. Also consider that the factors of production are capital, labor and land.

1. Consider the case in which international capital transfers between two nations is not allowed:

 

a)Find the total outputs in both nations. (United States) (Uzbekistan)

b)Calculate the world output

2. Consider the case in which free international capital transfers between two nations is allowed:

c)Find the total outputs in both nations.(United States) (Uzbekistan)

d)Calculate the world output

3. Compare the first and the second cases:

e)Calculate the n

Transcribed Image Text:

Value of marginal product of capital in the US 100*ID 90*ID 80*ID 70*ID 60*ID 50*ID 40*ID 30*ID 20*ID 10* ID United States 0 ID 2*ID 3*ID 4*ID VMPKUz S*ID 6 *ID 7*ID 8*ID 9*ID 10*ID 11*ID 12*ID 13*ID 14*ID 15*ID Total capital stock of US and Uzbekistan combined # 16*ID 17*ID Uzbekistan J VMPKUS 100*ID 90*ID 80*ID 70*ID 60*ID 50*ID 40*ID 30*ID 20*ID 10*ID 18*ID 19*ID 20+ID Value of marginal product of capital in Uzbekistan Value of marginal product of capital in the US 100*ID 90*ID 80*ID 70*ID 60*ID 50*ID 40*ID 30*ID 20*ID 10* ID United States 0 ID 2*ID 3*ID 4*ID VMPKUz S*ID 6 *ID 7*ID 8*ID 9*ID 10*ID 11*ID 12*ID 13*ID 14*ID 15*ID Total capital stock of US and Uzbekistan combined # 16*ID 17*ID Uzbekistan J VMPKUS 100*ID 90*ID 80*ID 70*ID 60*ID 50*ID 40*ID 30*ID 20*ID 10*ID 18*ID 19*ID 20+ID Value of marginal product of capital in Uzbekistan

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Here are the stepbystep workings 1 No international capital transfers a United States capital stoc... View the full answer