Assume a Heckscher-Ohlin model. Home and Foreign produce food (F) and machinery (M) using labor (L) and capital (K) as the unique inputs in both sectors. Both countries face the same technologies. In both countries the input requirements are fixed at akF = 2, aLF = 1, akm = 2, and aLM = 3 (i.e., 3 units of labor are required to produce one unit of machinery etc.). Home is endowed with K = 800 units of capital-hours and L= 600 units of labor-hours. Foreign is endowed with K* = 600 units of capital-hours and L* = 400 units of labor-hours. The output of food is denoted by QF. The output of machinery is denoted by Qm- a) Determine Home's capital constraint. Home's capital constraint is b) Which of the two goods is capital-intensive in the production? is capital-intensive. c) Which output mix will be realized in Home if it uses all its resources? The optimal output mix is units of food and units of machinery. d) Which good will be exported by Home? Home will export

Assume a Heckscher-Ohlin model. Home and Foreign produce food (F) and machinery (M) using labor (L) and capital (K) as the unique inputs in both sectors. Both countries face the same technologies. In both countries the input requirements are fixed at akF = 2, aLF = 1, akm = 2, and aLM = 3 (i.e., 3 units of labor are required to produce one unit of machinery etc.). Home is endowed with K = 800 units of capital-hours and L= 600 units of labor-hours. Foreign is endowed with K* = 600 units of capital-hours and L* = 400 units of labor-hours. The output of food is denoted by QF. The output of machinery is denoted by Qm- a) Determine Home's capital constraint. Home's capital constraint is b) Which of the two goods is capital-intensive in the production? is capital-intensive. c) Which output mix will be realized in Home if it uses all its resources? The optimal output mix is units of food and units of machinery. d) Which good will be exported by Home? Home will export

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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