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 not factors (compared to autarky) in terms of the resulting world market equilibrium good price and wages (explain, no computation needed).

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 not factors (compared to autarky) in terms of the resulting world market equilibrium good price and wages (explain, no computation needed).

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

For the first several questions, you will deal with Westburg, a nation with a per-worker production function y = f(k) = 5k¹/2 (5 times the square root of k). The marginal product of capital for this production function is 2.5k-¹/2 (2.5 times 1 divided by the square root of k, or 5 divided by (2 times the square root of k)). The economy starts with 400 units of capital per worker (see Table One); people in the economy consume 86% of each dollar of income they earn, and machinery depreciates at a steady rate to be totally used up/worthless in 50 years. There is no technology or population growth. Below is Table One; you'll fill in some, but not all, of the spaces marked by letters: Table One: Row 1 2 3 Question 1 k 400 f 1 y a g m C b h n i C i O Consider the information given about Westburg in Table One. Tell me the value for cell a, carefully following all numeric directions. Sk d j р ΔΚ e k q
Suppose K = 1000, total amount of capital available for production %3! L = 2000, total amount of labor available for production Suppose use a fixed mix of capital and labor in each sector. aKc = 4, capital used to produce one yard of cloth aLc = 2, labor used to produce one yard of cloth aKF = 1, capital used to produce one calorie of food %3D ALF = 1, labor used to produce one calorie of food %3! a. Suppose the relative price of cloth equals 1. Compute the quantities of cloth and food. b. Now assume the relative price of cloth is equal to 3. Compute the quantities of cloth and food.
In the short run, we assume that capital is a fixed input and labor is a variable input, so the firm can increase output only by increasing the amount of labor it uses. In the short-run, the firm's production function is q = f(L,K), where q is output, L is workers, and K is the fixed number of units of capital. equation for the production function is given by: A specific or, when K = 30, The level of output q for 2 units of labor input is (enter your response rounded up to two decimal places). q = 8KL + 5L² q = (8×30×L) + 5L² 3 L³. - (3) L³.
Consider two competitive economies that have the same quantities of labor (L = 400) and capital (K = 400), and the same technology (A = 100). The economies of the countries are described by the following Cobb–Douglas production functions: North Economy: Y = A L.3K.7 South Economy: Y = A L.7K.3 In which economy is the real wage larger? Explain.
Assume the production function takes the general form (as in lecture notes) Y = z xF(K,L, A) Z X where all marginal products are positive. Which 3 of the following statements are correct? Select one or more: O a. If A is fixed, then population growth acts as a drag on growth of output per person. b. If A is fixed, then population growth acts as a drag on growth, and so Malthus was correct that population growth will always reverse the impact of technological improvements. Both rises in z and rises in K/L (capital intensity) will boost output per worker. O d. Growth in output per worker can occur due to rises in z (technology) or rises in K/L (capital intensity), or both.
Consider the production function Y=z.K^1/3,N^1/3,L^1/3 where Y is output, z is a parameter capturing technology, K is capital, N is labour and L is the area of land. We would need to increase capital input by a factor of 8 to double output. Select one: True False
In the graph below, you would prefer to be at point B in this graph rather than point C because it leads to cost of producing the same level of output. Capital 2 H F D A B 56 E Labor с 15 G Output = 20 Output = 10
Hand written solutions are strictly prohibited
Consider the following production functions: 1. Y = AK2/3L1/3 2. Y = AK + BL 3. Y = (AK)34L3/4 4. Y = AH2L For each of the production functions listed above: Determine whether the function exhibits CRS, diminishing returns to physical capital (or а. human capital, when applicable), and diminishing returns to labor. b. Check whether it satisfies the Inada conditions. c. Compute the per capita production function.
Help me .....
Question 6 ▼ Suppose a Cobb-Douglas Production function is given by the following: P(L, K) = 10L0.9 K0.1 where L is units of labor, K is units of capital, and P(L, K) is total units that can be produced with this labor/capital combination. Suppose each unit of labor costs $100 and each unit of capital costs $700. Further suppose a total of $140,000 is available to be invested in labor and capital (combined). Units of labor, L = A) How many units of labor and capital should be "purchased" to maximize production subject to your budgetary constraint? Submit Question Units of capital, K = B) What is the maximum number of units of production under the given budgetary conditions? (Round your answer to the nearest whole unit.) Max production = Question Help: Video units
In the short-run, we assume that capital is a fixed input and labor is a variable input, so the firm can increase output only by increasing the amount of labor it uses. In the short-run, the firm's production function is q = f(L, K), where is output, L is workers, and K is the fixed number of units of capital. Given a specific equation for production: or, when K = 29, Calculate the q = 8LK+ 5L² q = (8L × 29) + 5L² X - Average Product = 3 (13) ₁³. 102 and enter the values in the table to the right. (Round your answers to the nearest integer.) E Labor 624 0 6 8 10 12 Output or Product 0 481 987 1,500 2,005 2487 2,928 Production Marginal Product -- 241 253 257 253 241 221 Average Product -- 241 247 251 249