By using the concept of the Heckscher-Ohlin model, and information assumptions below this i. Two factors of production, namely Labor and Land ii. Two production goods, namely Cloth and Food iii. Cloth production is labor intensive iv. Food production is land intensive v. The rest are other HO assumptions vi. aLC, aTC, aLF, aTF, and a*LC, a*TC, a*LF, a*TF are Labor and Land input units used for the production of each each Cloth and Food vii. w is the factor price of Labor and r is the factor price Land production a) Show that Cloth is a commodity that is labor intensive and Food is a land intensive commodity? k) According to the Stolper-Samuelson Theorem, an increase in the relative price of output PC/PF, how does it affect a) The relative income of the factors of production Labor and Land or w/r? b) Land/Labor Ratio? l) According to the H-O Model, a country has a comparative advantage in producing a commodity when? Give an example. m) According to Rybczynski theorem with an increase in the factor of production Land or an increase in the T/L ratio in an economy, how does it affect a) Food/Cloth output quantity ratio and PF/PC output price ratio? b) On what commodity, will production be efficient? n) According to the H-O trade model, assuming domestic is labor plentiful and foreign are land plentiful, then determine a) On what commodity, Domestic will produce efficiently? And On what commodity, Foreing will produce efficiently? Explain b) Impact of the increase in PC/PF? c) What commodities are exported and imported by each? Domestic and Foreign? d) Explain the gain from trade of each country if they specializes in production on its comparative advantage? e) Why will there be a factor price equalization?
By using the concept of the Heckscher-Ohlin model, and information assumptions
below this
i. Two factors of production, namely Labor and Land
ii. Two production goods, namely Cloth and Food
iii. Cloth production is labor intensive
iv. Food production is land intensive
v. The rest are other HO assumptions
vi. aLC,
Labor and Land input units used for the production of each
each Cloth and Food
vii. w is the factor
Land production
a) Show that Cloth is a commodity that is labor intensive and Food
is a land intensive commodity?
k) According to the Stolper-Samuelson Theorem, an increase in the relative price of output
PC/PF, how does it affect
a) The relative income of the factors of production Labor and Land or w/r?
b) Land/Labor Ratio?
l) According to the H-O Model, a country has a
in producing a commodity when? Give an example.
m) According to Rybczynski theorem with an increase in the factor of production Land
or an increase in the T/L ratio in an economy, how does it affect
a) Food/Cloth output quantity ratio and PF/PC output price ratio?
b) On what commodity, will production be efficient?
n) According to the H-O trade model, assuming domestic is labor
plentiful and foreign are land plentiful, then determine
a) On what commodity, Domestic will produce efficiently? And
On what commodity, Foreing will produce efficiently? Explain
b) Impact of the increase in PC/PF?
c) What commodities are exported and imported by each?
Domestic and Foreign?
d) Explain the
specializes in production on its comparative advantage?
e) Why will there be a factor price equalization?
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