F mostly endowed with capital relative to Mexico. Assume also that clothing is labor-intensive in production relative to autos. States 32 a. Use the factor endowment theory framework to label the two transformation schedules below, indicating which one represents Mexico and which one the United States. Qclothing Qclothing Quutos Qautos autos b. Assuming similar tastes or preferences as reflected in the two indifference curves shown in part a, draw the pre-trade price line for each country. Which one is steeper? What does this mean? In which country are autos relatively more expensive?
F mostly endowed with capital relative to Mexico. Assume also that clothing is labor-intensive in production relative to autos. States 32 a. Use the factor endowment theory framework to label the two transformation schedules below, indicating which one represents Mexico and which one the United States. Qclothing Qclothing Quutos Qautos autos b. Assuming similar tastes or preferences as reflected in the two indifference curves shown in part a, draw the pre-trade price line for each country. Which one is steeper? What does this mean? In which country are autos relatively more expensive?
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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