(e) Assume that Home and Foreign open to trade with each other. Explain how is the pattern of trade (which good will each country export and import) determined Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each countryi = H, F have preferences over two goods x and y.In each country there is only one factor of production, labour, which is perfectly mobile between industries butimmobile between countries. The total labour endowment at Home is Īμ = 10 and the total labour endowmentin Foreign is LF = 10.The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units ofgood x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of goody per unit of time.Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardlessof their prices. That is, Cri'xi = Cyi, i = H, F.

Comparative Advantage: In the trade theory the country which have comparative advantage in producing…

Answered: (e) Assume that Home and Foreign open…

(e) Assume that Home and Foreign open to trade with each other. Explain how is the pattern of trade (which good will each country export and import) determined

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Related questions

Q: you have been hired by an International Organization to be consulted on various issues that the…

Q: Explain why international trade is important to the economy.

A: International trade is the purchase and sale of products and services by companies in different…

Q: Determine the opportunity cost for each nation. Determine what each nation has a comparative…

A: “Since you have posted a question with multiple sub-parts, we will solve first three sub-parts for…

Q: The North American Free Trade Agreement (NAFTA) has developed a) b) c) d) a decrease in trade among…

A: The United States, Canada, and Mexico joined together to form a trading bloc in North America under…

Q: The two primary reasons to adopt measures to restrict trade are that a. they help keep real wages…

A: International trade is the process of exchange of goods and services between different countries.…

Q: Which nation has comparative advantage in producing good X? Why? Explain why these nations can…

A: Comparative advantage refers to the advantage of producing a good at a lower opportunity cost than…

Q: (h) Relative world demand is given by: PB DB + DB Pw where Dw + Dw is world quantity demanded of…

A: G) In order to draw relative demand curve,We would re arrange the given equationDw + Dw' =…

Q: a.) Draw a free trade equilibrium diagram for nation 1. b.) Without the use of the diagrams, explain…

A: In international trade theory, countries with comparative advantage of production trade with other…

Q: Many people will lose or have lost their jobs because of the growth of international trade. So, why,…

A: The answer is as follows:-

Q: What insights do welfare analysis (consumer surplus/producer surplus) offer into international…

A: International trade refers to when an economy is open to trade with the rest of the world by selling…

Q: When a nation concentrates on a certain production activity based on a specific resource, which of…

A: The nations around the globe tend to have a limited amount of resources with them, which is the…

Q: 1. Based on the above diagram, what is the trade pattern between the U.S. and China?

A: Free trade is an economic policy that promotes unrestricted import and export of goods and services…

Q: Countries need to trade because--------. Select one: a. world resources are unevenly distributed…

A: International trade refers to the buying and selling of goods across countries. Economist argues…

Q: Explain the main causes for international trade.?

A: According to the bartleby rules I will only answer the first question as you have not mentioned that…

Q: demand

A: Foreign demand" refers to the desire or need for items and offerings from one usa by people,…

Q: Which of the following is NOT a potential benefit of international trade? A. Increased consumer…

A: The issue requires distinguishing which option among the given four is unquestionably not a probable…

Q: answer with explanation and conclusion T OR F Limiting the extent of international trade by imposing…

A: Tariffs : Tariffs are taxes or duties imposed on imported goods by a country's government. They…

Q: What are the advantages of trade? Explain how trade impacts U.S. consumers, U.S. producers,…

A: As economies emerged, goods and services were produced that required machinery and labour. With…

Q: What is the importance of the terms of trade?

A: Introduction - A key economic indicator of a company's health based on its imports and exports is…

Question

(e) Assume that Home and Foreign open to trade with each other. Explain how is the pattern of trade (which good will each country export and import) determined

Consider a world composed of two countries, Home (H) and Foreign (F). Individuals living in each country
i = H, F have preferences over two goods x and y.
In each country there is only one factor of production, labour, which is perfectly mobile between industries but
immobile between countries. The total labour endowment at Home is Īμ = 10 and the total labour endowment
in Foreign is LF = 10.
The marginal product of labour in each industry is constant. At Home, one worker can produce 2 units of
good x or 1 unit of good y per unit of time; at Foreign one worker can produce 1 unit of good x or 2 units of good
y per unit of time.
Assume that consumers in Home and Foreign always consume goods x and y in the same quantity regardless
of their prices. That is, Cri
'xi = Cyi, i = H, F.

Expert Solution

This question has been solved!

Explore an expertly crafted, step-by-step solution for a thorough understanding of key concepts.

SEE SOLUTION Check out a sample Q&A here

Step 1: Introduction

VIEW

Step 2: Final Answer

VIEW

Solution

VIEW

Step by step

Solved in 3 steps

SEE SOLUTION Check out a sample Q&A here

Knowledge Booster

Learn more about

Need a deep-dive on the concept behind this application? Look no further. Learn more about this topic, economics and related others by exploring similar questions and additional content below.

Similar questions

Question: what are some examples of successful expansion of global trade, countries are seeing, and using, trade as a weapon during and after recessions? please answer in paragraphs, thank you for your time!
Which of the following are benefits of international trade? Choose one or more answers from the choices shown. a. A more efficient allocation of resources. b. A higher level of material well-being. c. Gains from specialization. d. Promoting competition. e. Deterring monopoly. f. Reducing the threat of war.
Why does North Korea choose to isolate itself economically? Why does South Korea embrace international trade? Using Adam Smith IdeasLinks to an external site. on "The Wealth of Nations" discuss the reasons why North Korea has remained underdeveloped, whereas South Korea has become highly developed.
How might a particular country's government affect and be involved in international trade?
In the past 20 years the United States has entered into several "free trade agreements." The commonality of these free trade agreement has been making it easier for foreign companies to sell their goods in the United States (imports) and for American companies to sell their goods overseas (exports) What are the key points of specific trade agreement the United States has entered into in the last 25 years? And what other countries are involved and what kinds of trade restrictions and/or tariffs were changed as a result of that agreement.
Specialization and Trade Comparative Advantage Imports and Exports Foreign Exchange Globalization and Trade Barriers Which of these five concepts affects you the most? Explain why.
Producing socks is labor-intensive, while producing satellites is capital-intensive. If India hasabundant labor, and the U.S. has abundant capital,which good will the U.S. export? Is trade beneficial to textile laborers in the U.S.?
You may need to refer to the textbook, or use some mathematical intuition, for this question. A country will be able to consume a combination of goods that is not attainable solely from domestic production if: a. the country avoids international trade. b. the country specialises in one product. c. the country’s domestic production value equals world relative value. d. the world terms of trade differ from the domestic relative costs. e. the world terms of trade equal the domestic relative costs.
what is the rational for a country that promotes free trade to put tariffs on some imported goods and services?
If a country closes off to trade and notices that the number of firms in an industry doubles in size, what economic theory would help us explain this phenomenon? A. Stolper-Samuelson. B. Melitz. C. Ricardian. D. Cournot.