Consider the Specific Factors model with two countries, Home and Foreign, with twogoods, cloth (c) and food (f), and three factors, capital K, labour L and land T.The production functions are given by1 1Fc(Kc, Lc) = K² Lễ and Fƒ(Lƒ,Tƒ) = L==That is, capital is specific to cloths and land to food. Suppose that the countries'factor endowments are KH : 1 = KF, LH= 1 and LF1, and TH 1 andTF = 1/2, so that the total labour force is 1 in both countries. The price of capital isdenoted by r,the price of land by q and the price of labour by w. Denote the goods'prices by pc and pƒ, and normalise pf = 1 for simplicity.The demand for cloth and food in country j = H, F is given by x and rlyjlyjx²and x2 pc2 pwhere YJ denotes aggregate income in country j.(a) Draw or compute the PPFs of Home and Foreign.(b) Derive the autarky equilibrium in Home, showing that L = L and r² = qH.(c) Compute the autarky equilibrium in Foreign and compare equilibrium prices inHome and in Foreign. Explain.(d) With free trade in both goods c and f, which good will Home export, and willcapital owners, land owners and workers each be better off? Explain or compute.==

PPF production possibility frontier the locus of points depicting the output mix which a country can…

Consider the Specific Factors model with two countries, Home and Foreign, with two goods, cloth (c) and food (f), and three factors, capital K, labour L and land T. The production functions are given by Fe(Ke, Le) = K² L² and Fƒ(Lƒ,Tƒ) = L}T}. = = 1 and LF = That is, capital is specific to cloths and land to food. Suppose that the countries' factor endowments are KH 1 = KF, LH 1, and TH = 1 and TF = 1/2, so that the total labour force is 1 in both countries. The price of capital is denoted by r, the price of land by q and the price of labour by w. Denote the goods' 1 for simplicity. prices by pe and and normalise pf Pf, = The domand buntmu a U Din ma

Consider the Specific Factors model with two countries, Home and Foreign, with two goods, cloth (c) and food (f), and three factors, capital K, labour L and land T. The production functions are given by Fe(Ke, Le) = K² L² and Fƒ(Lƒ,Tƒ) = L}T}. = = 1 and LF = That is, capital is specific to cloths and land to food. Suppose that the countries' factor endowments are KH 1 = KF, LH 1, and TH = 1 and TF = 1/2, so that the total labour force is 1 in both countries. The price of capital is denoted by r, the price of land by q and the price of labour by w. Denote the goods' 1 for simplicity. prices by pe and and normalise pf Pf, = The domand buntmu a U Din ma

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Economic Growth Akila and her family are the only inhabitants of a small oasis in the middle of the desert. They grow various kinds of trees, which provide them with everything they need. Akila has built an irrigation system that improves the productivity of the land. Production makes use of three factors: capital K (the irrigation system), labour N (the work done by Akila and her family) and land L (the oasis and the desert around it). The production function is given by F(K,N,L)= K*N*L*. Labour supply is fixed at N=1 and the family owns 64 units of land, L=64. The irrigation system is in constant need of repair; about 10% needs to be rebuilt every year to keep it in a good condition, i.e. K' = K – K +1, where I is investment in the capital stock. 1. Show that for a saving rate s, the law of motion for the capital stock can be written in per-capita terms as k'=k-k+s2vk . 2. Find the steady-state level of the capital stock k, output y and consumption e as functions of s. 3. Currently,…
Please explain steps to formulate the equation in (i)
Consider the Specific Factors model with two countries, Home and Foreign, with two goods, cars (c) and pharmaceutical drugs (d), and three factors, capital K, skilled labour S, and unskilled labour L. The production functions are given by 1 1 F.(Ke, Le) = K. Lễ and Fa(Ka, Sa) = K}S}. That is, skilled labour is specific to pharmaceutical drugs, and unskilled labour to cars. Suppose that the countries' factor endowments are KH = 2 = KF, 1 and SF LH and LF 3/2, and SH 1/2, so that the total labour force is 2 in %3D both countries. The price of capital is denoted by r, the price of skilled and unskilled labour by ws and Wi. Denote the goods' prices by pc and pa, and normalise pd = 1 for simplicity. The demand for cars and drugs in country j = H, F is given by x and r: 2Yi and x 3 på 3 p where Yi denotes aggregate income in country j. (f) Suppose that now that Foreign has a production technology FF (Ke, S.) = 2K Lề and Ff(La, Sa) = 2K S. %3| Describe the effect of free trade in goods but…
In the Romer model presented in class, a firm can allocate labor between production and research and development (technology). What happens if an economy allocates all of its labor to production and none to technology? it will reduce output it will slightly reduce the number of ideas it generates it will increase the number of ideas it generates it will not generate any ideas None of these answers are correct.
Please don't copy
The demand and supply of pizza is defined by the following equations: Qd = D(P, Y ) = 1 + Y − 2P Qs = D(P, PM) = 2 P/PM where, Qd is quantity demand, P is the price of each pizza sold, Y is the average income of consumers, Qs is the quantity supplied, and Pm is the price of inputs used in the production of pizza. (a) List the endogenous and exogenous variables of this model (b) Find the equilibrium price Pe and quantity Qe of pizza as a function of the exogenous variables. (c) Use a simple demand and supply diagram to show what happens to the equilibrium price and quantity when there is an increase in one of the exogenous variables.
Suppose that the economy's production function is given by Y=K²N¹-a where Y is output, K is capital, and N is labor. Assume that a = 1/3. The production function transformed into output per worker is (Property format your expression using the tools in the palette. Hover over tools to see keyboard shortcuts. E.g., a superscript can be created with N character.)
Please solve b,c and d.
Question-3 Consider the figure below which shows the combined production function of Anna and Bob: Wheat (bushels) A Free-time (hours) [slope at A = slope at y] a) Assume a case where Anna works the land owned by Bob. By referring to the diagram above, explain how does Anna rank the possible allocations marked as X, Y, Z and A? b) Now assume a separate case whereby Anna is a slave to Bob. It is also given that Anna recently suffered from Corona virus and thus her nutrition needs are amplified- for more hours of work that she puts in, she requires more bushels of wheat, even just to survive. Draw a modified version of the diagram above to depict how Anna's biological survival constraint change in this case and also comment with brief reasoning whether Anna would be better off on her altered biological survival constraint compared to before? c) Suppose a new scenario where the Government has introduced a new social welfare program to cater to the poor of the society, wherein the…
Problem B: The Production Model Consider the production model that we have seen in class with a production function for final output specified as Y = K1/4L3/4 Capital and labor available in the economy are, respectively, K = 40 and L = 50. B.1 Write down the profits maximization problem for firms in the production model (you can write profits in units of final output). Derive the first order conditions for the firm's maximization problem and provide the economic interpretation of the first order condition for labor. B.2 Please define the property of "Constant Returns to Scale" as we did in class. Does the production function above exhibit constant returns to scale? Show your computations. B.3 State the equations that constitute the competitive general equilibrium for the economy in the production model above. What are the variables that you need to solve for to obtain a solution to the equilibrium?
Consider an economy that has a labor endowment of L = 40 units. The production functions are x = 0.5L, and y = 4Ly, where x and y are consumption goods while L, and Ly represent the labor allocation. What is the equation for the PPF? 8x + y = 160 6x + 2y = 80 6x + y = 120 8x + 2y = 80
Let y = f(x1, x2)=x11/2 + x1x2 be a firm’s production function, where x1≥0, x2≥0. Write down the firm’s production possibility set, and its input requirement set. Is this production function concave, quasi-concave? Is this production function homogenous? Find its returns to scale when x1=1, and x2=1.