cost data:Assembly: Total cost of production = 400Earnings of High-Skilled Labor = 100Earnings of Low-Skilled Labor = 200Earnings of Capital = 100R&D: Total cost of production = 400Earnings of High-Skilled Labor = 175Earnings of Low-Skilled Labor = 125Earnings of Capital = 100A) In which factor is assembly intensive? In which factor is R&D intensive? Suppose that due to the opening of trade, the price of assembly falls by −20%, the price of R&Dremains unchanged, 0%, and capital’s share earnings remains constant. What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?
cost data:Assembly: Total cost of production = 400Earnings of High-Skilled Labor = 100Earnings of Low-Skilled Labor = 200Earnings of Capital = 100R&D: Total cost of production = 400Earnings of High-Skilled Labor = 175Earnings of Low-Skilled Labor = 125Earnings of Capital = 100A) In which factor is assembly intensive? In which factor is R&D intensive? Suppose that due to the opening of trade, the price of assembly falls by −20%, the price of R&Dremains unchanged, 0%, and capital’s share earnings remains constant. What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
Related questions
Question
cost data:
Assembly: Total cost of production = 400
Earnings of High-Skilled Labor = 100
Earnings of Low-Skilled Labor = 200
Earnings of Capital = 100
R&D: Total cost of production = 400
Earnings of High-Skilled Labor = 175
Earnings of Low-Skilled Labor = 125
Earnings of Capital = 100
A) In which factor is assembly intensive? In which factor is R&D intensive? Suppose that due to the opening of trade, the
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