Suppose two countries, Canada and Mexico, produce two goods: timber and televisions. Assume that land is specific
Question:
a. In a graph similar to Figure 3-5, show how the wage changes in Canada due to a fall in the price of televisions, holding constant the price of timber. Can we predict that change in the real wage?
b. What is the impact of opening trade on the rentals on capital and land in Canada? Can we predict that change in the real rentals on capital and land?
c. What is the impact of opening trade on the rentals on capital and land in Mexico? Can we predict that change in the real rentals on capital and land?
d. In each country, has the specific factor in the export industry gained or lost and has the specific factor in the import industry gained or lost?
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Related Book For
International Economics
ISBN: 978-1429278447
3rd edition
Authors: Robert C. Feenstra, Alan M. Taylor
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