Assume Home opens up to international trade with Foreign. Let the no-trade price of manufacturingP = . Select all7in Home be and let the no-trade price of manufacturing in Foreign be=PAPA8*W(PM)" that this economy could take. Hint:the possible world equilibrium relative pricesW(PM)"PMRemember that <PA3/81/23/414/3PMPA

Home opens up to international trade with Foreign. No-trade price of manufacturing in Home (PM/PA) =…

Assume Home opens up to international trade with Foreign. Let the no-trade price of manufacturing PM Рм in Home be = PA and let the no-trade price of manufacturing in Foreign be = . Select all PA W PM the possible world equilibrium relative prices ( that this economy could take. Hint: PA W PM PA Remember that < ( PM PA < PM PA

Assume Home opens up to international trade with Foreign. Let the no-trade price of manufacturing PM Рм in Home be = PA and let the no-trade price of manufacturing in Foreign be = . Select all PA W PM the possible world equilibrium relative prices ( that this economy could take. Hint: PA W PM PA Remember that < ( PM PA < PM PA

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Consider a Ricardian trade model where both countries have expenditure share q = 0.2 on %3D manufactures, Country 1 has Am = 1 and As = 4 and L = 100 while Country 2 has Am* = As* = 0.5 and L* = 200. With free trade, which of the following is true? %3D All of the other options Country 2 produces 100 manufactures and exports 80 manufactures The relative wage is w/w* = 8 Country 1 produces 400 services and exports 80 services
“In what way does an understanding of the shifts in the PPC help businesses/countries make production decisions?” Rubric: ensure the importance of absolute and comparative advantage is made clear.
Suppose each worker in Home can produce 12 wheat or 4 TVs. Assume that Home has 10 workers. Suppose each worker in Foreign can produce 8 wheat or 2 TVs. Assume that Foreign has 20 workers. a. What is the no-trade relative price of TVs in Home and Foreign respectively?b. Which country has an absolute advantage in the production of wheat? Whichcountry has a comparative advantage in the production of wheat?c. Use two graphs (one for Home and one for Foreign) to display productionpossibilities along with indifference curves and label no-trade equilibria and a trade equilibrium constructed by you. (Assume that positive quantities of both goods are consumed in both countries in all equilibria). Pick your own numbers for the relative price in the trade equilibrium and for quantities consumed in the trade and no-trade equilibria for both countries.d. What is the real wage in units of wheat in Home in the no-trade and in your proposed trade equilibrium?e. Calculate the gains from trade for Home…
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Consider a small country that exports steel. Suppose the following graph depicts the domestic demand and supply for steel in this country. One of the two price lines represents the world price of steel. Use the following graph to help you answer the questions below. You will not be graded on any changes made to this graph. Because this country exports steel, the world price is represented by ________ . Suppose that a “pro-trade” government decides to subsidize the export of steel by paying $10 for each ton sold abroad. With this export subsidy, the price paid by domestic consumers is _________ per ton, and the price received by domestic producers is ___________ per ton. The quantity of steel consumed by domestic consumers _______ , the quantity of steel produced by domestic producers ______ , and the quantity of steel exported ________ . True or False: With the export subsidy, domestic producers will sell steel to domestic consumers and sell the rest…
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A) Assume now that the world consists of only two countries: Brandtlandia and Hollandia. Every year many tourists visit each other’s countries. The only other good Brandtlandia imports are tulip bulbs. Brandtlandia uses the Thaler as currency, and Hollandia the Guilder. The policy options in Brandtlandia are copied here for your convenience. Policy 1: Open the economy to trade with no-trade protection.Policy 2: Open the economy to trade but impose a tariff on the import of tulip bulbs that would set the price of tulip bulbs to 80 Thaler per tulip bulb.Policy 3: Open the economy to trade but limit imports to a quota of 50 tulip bulbs. Brandtlandia currently uses policy option 1, and the equilibrium exchange rate (e) is 2 Guilder for 1 Thaler (and this is the exchange rate notation you need to use for this question). If Brandtlandia implements policy option 2, what will be the initial effect on the exchange rate if the exchange rate is flexible? Explain your answer. Suppose that the…