Consider two countries, Spain and Colombia. Both countries produce the same homogeneousgood and use the same technology Y = K1/2 . Lª/2. The only difference between them is thatSpain is relatively more abundant in capital than Colombia. Suppose that initially Ls = 4, Lc = 4,Ks = 16 and Kc= 1.2.(a) Compute the wage rate and the rental price of capital in Spain and Colombia, assumingthere is NO factor mobility. Compare the wage rate and the rental price of capital acrosscountries. By the way, note that since there is only one good, the difference between realand nominal does not matter.(b) Now allow for migration (labor mobility), but not for capital mobility. Compute the numberof workers in equilibrium in each country, and compare your findings to the initialsituation.(c) Compute the new wage rate and the new rental price of capital in each country. Who gainsand who loses in Spain?(d) Show that global economic efficiency increases, i.e., the world production goes upcompared to the situation with no labor mobility.(e) Show that the "original" residents of Spain gain, i.e., the gains of those who gain in Spainmore than compensates the loss of those who lose.

Solutions for first 3 questions has been given. Please repost the question mentioning specific part…

Answered: Consider two countries, Spain and…

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

Suppose Industry X employs $1m worth of capital per employee and Industry Y employs $500,000 worth of capital per employee. Economist say that: 000 Industry X is capital intensive compared to Industry Y Industry Y is capital intensive compared to Industry X Industry Y is inefficient. Industry X is inefficient.
Q9 What’s the correct answer ?
1. Dave Grohl wants to buy drums and guitars. Drums are sold in an unusual way. There is only one supplier, and the more drums you buy from him, the higher the price you have to pay per unit. In fact, y units of drums will cost Dave y² dollars. Guitars are sold in the usual way at a price of 2 dollars per unit. Dave's income is 20 dollars, and his utility function is U (x,y) = x+2y, where x is his consumption of guitars and y is his consumption of drums. A. Sketch Dave's budget set and shade its in. B. Sketch some of his indifference curves and label the point that he chooses. C. Calculate the number of drums and guitars that Dave demands at these prices and this income.
Q2. Suppose the wage ratio of skilled labor v.s. unskilled labor, wH/wL, is highest in country A, intermediate in country B, and lowest in country C, and country C's production involves two stages/tasks, the skilled-labor intensive R&D and the unskilled-labor intensive components. (a) To which country should country C offshore its component production so that country C's output is maximized? (b) Use a PPF-indifference curve graph with components on the X axis and R&D on the Y axis to show the gains from offshoring for country C in the above case. In the graph, identify the amount of R&D exports and component imports. (c) How will the gain from offshoring change if country C offshores its component production to the other foreign country? (d) Please discuss some other effects of offshoring that are not reflected in the graph. Your answer:
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 (1990), if the level of technological knowledge is 1000, productivity parameter in the R&D sector is 0.0001, and wage paid to human capital is 50, what is the price of a new design from the R&D activities? (Show calculation steps.) In the Romer Model (1990), suppose the productivity parameter in the R&D sector is 0.0001 and the stock of human capital in the economy is 5000, of which 4000 is allocated to the manufacturing of the final goods. In the final goods production sector, output elasticity with respect to labor is 0.3 and output elasticity with respect to human capital is 0.5. Find the equilibrium interest rate. (Show calculation steps.)
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 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, and LF = 3/2, and SH LH :1 || 1 and SF = 1/2, so that the total labour force is 2 in both countries. The price of capital is denoted by r, the price of skilled and unskilled and normalise pa = labour by w, and wi. Denote the goods' prices by pc and Ра, : 1 for simplicity. The demand for cars and drugs in country j = H, F is given by x and r: %3D 2Yi and ra 3 pe 1Yi %3D 3 pa where Y' denotes aggregate income in country j. (a) Draw or compute the PPFS of Home and Foreign.
Consider the following production diagram: 12 10 A Capital 6 2 0 0 1 Labor 4 For each of the five labeled points (A, B, C, D, and E), determine whether the correct levels of labor and capital are being used. If the correct level is not being used, explain why, and what change should be made. Hint: Start by identifying the optimal point. Being able to compare to the optimal point will assist you in determining the changes that need to be made.
What is technological diffusion? Describe the two models of technological diffusion. Which of these models do you think is accurate in describing the global and social digital divide, and why?
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 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, L# and LF = 3/2, and SH = 1 and SF = 1 1/2, so that the total labour force is 2 in both countries. The price of capital is denoted by r, the price of skilled and unskilled labour by w, and w. Denote the goods' prices by pc and pd, and normalise pd 1 for simplicity. The demand for cars and drugs in country j = H, F is given by x and r: 1Yi 2Yi and x 3 ре || 3 pi where Y' denotes aggregate income in country j. (c) Compute the autarky equilibrium in Foreign and show that p > p. Compare equilibrium prices in Home and in Foreign and explain.
Please answer the following questions and carefully label , and briefly explain the following diagrams. You are welcome to write any accompanying text by hand. 5. Show how the diagram changes if there is an improvement in the technology of food production.Hint: this means that for a given number of hours’ work, Angela can produce more. 5.2. If Angela is an independent farmer, show how the technology improvement might cause heroptimal labour supply to either fall or rise. Which seems more consistent with the data?
Please solve b,c and d.

SEE MORE QUESTIONS

Recommended textbooks for you

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

ENGR.ECONOMIC ANALYSIS

Economics

ISBN:

9780190931919

Author:

NEWNAN

Publisher:

Oxford University Press

Principles of Economics (12th Edition)

Economics

ISBN:

9780134078779

Author:

Karl E. Case, Ray C. Fair, Sharon E. Oster

Publisher:

PEARSON

Engineering Economy (17th Edition)

Economics

ISBN:

9780134870069

Author:

William G. Sullivan, Elin M. Wicks, C. Patrick Koelling

Publisher:

PEARSON

Principles of Economics (MindTap Course List)

Economics

ISBN:

9781305585126

Author:

N. Gregory Mankiw

Publisher:

Cengage Learning

Managerial Economics: A Problem Solving Approach

Economics

ISBN:

9781337106665

Author:

Luke M. Froeb, Brian T. McCann, Michael R. Ward, Mike Shor

Publisher:

Cengage Learning

Managerial Economics & Business Strategy (Mcgraw-…

Economics

ISBN:

9781259290619

Author:

Michael Baye, Jeff Prince

Publisher:

McGraw-Hill Education

SEE MORE TEXTBOOKS