a) Which commodity, bread or steel, is relatively capital-intensive and which is relatively labor-intensive? Show how to decide this. b) Which country will export bread and steel respectively? Why? Show how to determine this in a figure or with equations. c) Explain what happens to the return on capital and labor in Sweden and Norway after trade has begun between the countries.

a) Which commodity, bread or steel, is relatively capital-intensive and which is relatively labor-intensive? Show how to decide this. b) Which country will export bread and steel respectively? Why? Show how to determine this in a figure or with equations. c) Explain what happens to the return on capital and labor in Sweden and Norway after trade has begun between the countries.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Question

Assume that Sweden and Norway have the following set of production factors (see table
below). Suppose further that for the production of one unit of steel it takes two machines
and 8 workers and for one unit of bread it takes one machine and 8 workers.
Sweden
Norway
Capital
Labour
40 machines
10 machines
200 workers
60 workers
a) Which commodity, bread or steel, is relatively capital-intensive and which is relatively
labor-intensive? Show how to decide this.
b) Which country will export bread and steel respectively? Why? Show how to determine
this in a figure or with equations.
c) Explain what happens to the return on capital and labor in Sweden and Norway after
trade has begun between the countries.

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