Consider the Heckscher-Ohlin model of resource endowment. Suppose that Germany, a home country, is capital-abundant, with car manufacturing being a capital-intensive industry, and that Bangladesh is labor-abundant, with textile production being labor-intensive.a) Show the PPFs and consumption points of both Germany and Bangladesh on separate graphs. [NB: Put car production on the vertical axis).b) Illustrate the impact on production when both countries engage in international trade, indicating the patterns of trade (do not separte graphs).c) Based on part b), deduce graphically, the free-trade world equilibrium price and quantityLextreof cars.
Consider the Heckscher-Ohlin model of resource endowment. Suppose that Germany, a home country, is capital-abundant, with car manufacturing being a capital-intensive industry, and that Bangladesh is labor-abundant, with textile production being labor-intensive.a) Show the PPFs and consumption points of both Germany and Bangladesh on separate graphs. [NB: Put car production on the vertical axis).b) Illustrate the impact on production when both countries engage in international trade, indicating the patterns of trade (do not separte graphs).c) Based on part b), deduce graphically, the free-trade world equilibrium price and quantityLextreof cars.
Chapter2: Productions Possibilities, Opportunity Costs, And Economic Growth
Section: Chapter Questions
Problem 9SQ
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Transcribed Image Text:Consider the Heckscher-Ohlin model of resource endowment. Suppose that Germany, a
home country, is capital-abundant, with car manufacturing being a capital-intensive industry,
and that Bangladesh is labor-abundant, with textile production being labor-intensive.a) Show
the PPFs and consumption points of both Germany and Bangladesh on separate graphs. [NB:
Put car production on the vertical axis).b) Illustrate the impact on production when both
countries engage in international trade, indicating the patterns of trade (do not separte
graphs).c) Based on part b), deduce graphically, the free-trade world equilibrium price and
quantityLextreof cars.
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