A) Indicate which country is relatively capital abundant and which country is relatively labor abundant. Suppose that smartphone production is capital intensive and production of bread is labor intensive. Determine the country that will have comparative advantage in the production of smartphones. Explain your answer by using the relevant theory. B) Explain what happens to the returns to capital and labor in each country after trade begins

A) Indicate which country is relatively capital abundant and which country is relatively labor abundant. Suppose that smartphone production is capital intensive and production of bread is labor intensive. Determine the country that will have comparative advantage in the production of smartphones. Explain your answer by using the relevant theory. B) Explain what happens to the returns to capital and labor in each country after trade begins

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Exercise Annika spends all of her income on golf and pancakes. Greens fees at a local golf course are $10 per round. Pancake mix is $2 per box. When Annika's income is $100 per week, she buys 5 boxes of pancake mix and 9 rounds of golf. When Annika's income rises to $120 per week, she buys 10 boxes of pancake mix and 10 rounds of golf. Based on these figures, determine whether each of the following statements is true or false, and briefly explain your reasoning 1. Golf is a normal good, and pancake mix is an inferior good 2. Golf is a luxury good 3. Pancakes are a luxury good
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