Assume a Heckscher-Ohlin model of trade.Australia (AUS) and New Zealand (NZL) producepaper (P) and carpets (C) using two factors, capital(K) and labor (L), that are mobile across sectors.Paper production is capital intensive and carpetweaving is labor intensive. Further, Australia has120 units of labor and 120 units of capital, whileNew Zealand has 100 units of labor and 80 unitsof capital. The cost of labor is w. The cost of capitalis r.a. Draw the relative labor demand in the paperand the carpet industry in the diagram below.Explain why one of them lies to the right of theother.WrLK b. In the diagram below, draw the relationshipbetween the relative price of paper/carpets andthe wage to rental ratio. Briefly explain.PePcw/rc. In autarky, do Australia and New Zealand usethe same mix of labor to capital in each industry?Explain why or why not using the diagram drawnin a)

According to H-O model of trade a country will export the commodity whose production will require…

Answered: Assume a Heckscher-Ohlin model of…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Finally, Canada and Australia are both English-speaking countries with not-too dissimilar population sizes. However, Canada’s trade is twice as large as that of Australia’s. to what extent, does comparative advantage help explain this?
No one country is self sufficient today, each country needs others for its smooth economic survival and therefore each country needs to go for international trade in order to adjust their economy in the global competition. Make this fact as a base and explain that how this international trade plays its significant role in the economic development of our country? Furthermore, international trade is not free from disadvantages. Explain some of the disadvantages briefly which are linked with Q1. international trade.
The table below for the United States and Mexico shows maximum feasible production rates per acre of wheat if no rice is produced and maximum feasible production rates per acre of rice if no wheat are produced. Assume that the opportunity costs of producing these goods are constant in both countries. Output per Acre with Trade Wheat 80 tons United States Mexico 55 tons For the United States, the opportunity cost of 1 ton of wheat is tons of rice. (Enter your response rounded to two decimal places.) has a comparative advantage in wheat, and has a comparative advantage in rice. Now consider the following table that shows the production and consumption of wheat and rice if there is no trade. Output per Acre with No Trade Wheat 40.0 tons 27.5 tons United States Mexico Total output of wheat if the two countries do not trade tons. (Enter your response rounded to one decimal place.) Total output of rice if the two countries do not trade tons. (Enter your response rounded to one decimal place)…
It has been shown that the US has a comparative advantage in capital-intensive goods while China has a comparative advantage in labour-intensive goods. Suppose as a result of trade the US's economy is going to grow by 30% and that of China by 40%. Based on this information, which of the following statements is correct? a) The US has the stronger bargaining power in the determination of the relative price after trade. b) In the US, the employers are better off while the workers are worse off as a result of trade. c) Specialization means that China will produce all the capital-intensive goods. d) China has the stronger bargaining power in the determination of the relative price after trade.
The main advantage of trade between two countries is that A) trade makes both countries more self-sufficient. B) employment in both countries will increase. C) both countries can produce beyond their previous resource and productivity constraints. D) both countries can consume beyond their previous resource and productivity constraints.
Consider the specific factors model. There are two countries (Home and Foreign), two industries (Manufacturing and Agriculture) and three factors (labour, land, and capital.) Assume that home has comparative advantage in agriculture. Using a figure, show the impact of trade on earnings of labour, capital and land. Who will be in favour of trade and who will be against it?
Argentina and Brazil are considering the potential gains of trade. There is only one factor of production: labor. There are only two goods being produced in either economy: coffee and wine. Argentina can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 2 hours of labor, and producing 1 bottle of wine requires 4 hours of labor, in Argentina. Similarly, Brazil can employ 10,000 hours of labor per month. Producing 1 lb. of coffee requires 1 hour of labor, and producing 1 bottle of wine requires 5 hours of labor, in Brazil. A). Which country has an absolute advantage in the production of coffee? B). Which country has an absolute advantage in the production of wine? C). Draw the Production Possibilities Frontier for the two countries.
When a country specializes in the production of a good, this means that it can produce this good at a lower opportunity cost than its trading partner. Because of this comparative advantage, both countries benefit when they specialize and trade with each other. The following graphs show the production possibilities frontiers (PPFS) for Maldonia and Lamponia. Both countries produce lemons and sugar, each initially (i.e., before specialization and trade) producing 24 million pounds of lemons and 12 million pounds of sugar, as indicated by the grey stars marked with the letter A. (? (?) Maldonia Lamponia 64 64 56 56 48 PPF 48 40 40 32 32 24 24 PPF 16 16 16 24 32 40 48 56 64 16 24 32 40 48 56 64 LEMONS (Millions of pounds) LEMONS (Millions of pounds) Maldonia has a comparative advantage in the production of production of while Lamponia has a comparative advantage in the . Suppose that Maldonia and Lamponia specialize in the production of the goods in which each has a comparative advantage.…
Answer the next question(s) on the basis of the following information. Assume that by devoting all its resources to the production of X, nation Alpha can produce 40 units of X. By devoting all its resources to Y, Alpha can produce 60Y. Comparable figures for nation Beta are 60X and 40Y. Refer to the above information. The terms of trade will be at or within the 1X=1¹/2Y to 1X = ²/3Y range. Select one: True False

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