QUESTION 4A small open economy produces two goods, 1 and 2, at output levels y;, i = 1, 2. Output prices are set on world markets and denoted p1, P2.The economy is endowed with quantities L of labour and K of capital. Capital is used in sector 2 only, and labour is used in both sectors, L;denoting the use of labour in sector i = 1, 2. The wage rate and the capital rental rate are w and r, respectively. The production function for good1 is y1 = L1 , and good 2 has production function y2 = VKL2.What is the equilibrium allocation of labour between sectors (expressed as a function of goods' prices and endowments)?O a. L = L – ()°K,L2 = (K.O b. L = (K, L2 = L – ()°K.O c. L1 = 0, L2 = L.O d. L = L, L2 = 0.%3DConsider the economy form Question 4. Suppose that there is another economy, which is identical to the first one but has a greater endowmentof capital K' > K.What is the output of good 2 in either economy? Assuming that consumers in both countries are identical, what is thepattern of trade between those two countries?a. The first country produces y2 = K and the second country produces y, = K'. Therefore, the first country exports good 1 and2p,imports good 2.O b. The first country produces y2 = L –-K and the second country produces y, = L – K'. Therefore, the first country exports%3Dgood 2 and imports good 1.O c. The first country produces y2 = K and the second country produces y, = K'. Therefore, the first country imports good 1 andexports good 2.O d. The first country produces y2 = L – K and the second country produces y2 = L – K'. Therefore, the first country imports%3D2p2p.good 2 and exports good 1.

Given,A small economy producing 2 goods: good 1 and good 2Labor and capital are the factors of…

QUESTION 4 A small open economy produces two goods, 1 and 2, at output levels y, i = 1, 2. Output prices are set on world markets and denoted P1, P2. The economy is endowed with quantities L of labour and K of capital. Capital is used in sector 2 only, and labour is used in both sectors, Li denoting the use of labour in sector i = 1,2. The wage rate and the capital rental rate are w and r, respectively. The production function for good 1 is 1 L₁, and good 2 has production function 1/2 = √KL2. What is the equilibrium allocation of labour between sectors (expressed as a function of goods' prices and endowments)? O a. L₁ L-(K, L₂ = (1)²K. O b. L (K, L₂ = L-(,)²K. O c. L₁ =0, L2 = L. O d. L₁ =L, L2 = 0.

QUESTION 4 A small open economy produces two goods, 1 and 2, at output levels y, i = 1, 2. Output prices are set on world markets and denoted P1, P2. The economy is endowed with quantities L of labour and K of capital. Capital is used in sector 2 only, and labour is used in both sectors, Li denoting the use of labour in sector i = 1,2. The wage rate and the capital rental rate are w and r, respectively. The production function for good 1 is 1 L₁, and good 2 has production function 1/2 = √KL2. What is the equilibrium allocation of labour between sectors (expressed as a function of goods' prices and endowments)? O a. L₁ L-(K, L₂ = (1)²K. O b. L (K, L₂ = L-(,)²K. O c. L₁ =0, L2 = L. O d. L₁ =L, L2 = 0.

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: Please look at the images and pick from the answer choices I have provided (bold choices). The…

A: The international trade would result in the exchange of the goods between one or more countries…

Q: Suppose that Country A is capital-endowed. Using the following production functions, which product…

A: The capital and labor are the factors of production and thus the comparative advantage would be…

Q: international trade Consider an H-0 economy in which there are two countries (US and France), two…

A: Answer Consider the US as a Home country and France as a Foreign country. Given that the US is a…

Q: Choose the most accurate definition of the "Free Trade Agreement." Question 32 options: a) The "Free…

A: The term imports refer to buying goods from other countries in which the country would have a…

Q: A country produces two goods and the opportunity cost of production of each good is constant. This…

A: Production possibilities curve represents different combinations of two goods that can be produced.…

Q: QUESTION 33 Ricardo's theory of trade is based on (A: productivity of labor; B: doportunity cost; C:…

A: Note: We’ll answer the first question since the exact one wasn’t specified. Please submit a new…

Q: When each person specializes in production of the good or service for which he or she has a…

A: The gains from specialization and trade are based not on absolute advantage but on comparative…

Q: (a) Draw or compute the PPFs of Home and Foreign. (b) Derive the autarky equilibrium in Home,…

Q: In the figure below, AB is the production-possibility curve of Canada. I and I are two of the…

A: International trade refers to the process of countries engaging in the interchange of goods and…

Q: 11. Which of the following statements is FALSE? a) This model shows only half of the benefits from…

A: Consumer surplus is the difference amount between the consumer’s willing payment and actual payment…

Q: Consider an economy with two goods, cloth and food. The production possibility frontier of this…

A: 1. Production Possibility Frontier (PPF): , where is the quantity of food and is the quantity of…

Q: Barrels 35 30 25 20 15 10 5 0 2 O wi B 4 6 8 10 12 14 16 Bathtubs Refer to Figure 2-8. What would…

A: Production Possibility Curve (PPC) shows the various combination of two goods that could be produced…

Q: Consider the open economy described by the accompanying table, where the input is in dollars needed…

A: Input output analysis shows interdependence of sectors in an economy. Input output matrix is used to…

Q: Production and consumption of Smartphones and Smart cars for the Republic of Westein and Republic of…

A: The Economic transaction of goods and services in between the countries is international trade.

Q: discuss the economic implications for all relevant economic agents of a country joining a common…

A: A common market is a contractual term in which a coalition of countries with common external tariffs…

Q: Use proper algebraic and diagrammatic analysis and explain the:a) State of General Equilibrium in a…

A: Suppose in a closed economy, there is a country home, producing only two goods X and Y using only…

Q: 1 Suppose there are two countries, Home (H) and Foreign (F), and two goods, bread (b) and cheese…

A: Free international trade : The absence of trade barriers , such as tariffs or import quotas ,…

Q: In the specific model with two consumption goods and labour (mobile) and land and capital (specific…

A: The specific factors model is a short-run model in which the capital and land inputs are fixed but…

Q: Two economies have endowments (K,L) = (100,200) and (K*,L*) = (110,190). With the technology in…

A: “Since you have posted multiple questions, we will provide the solution only to the first question…

Q: Assume that two countries, A and B, can produce Beef and Barbecues and the production possibilities…

A: ***Since the student has posted multiple subparts, so the expert is required to solve only the first…

Q: Consider the Heckscher-Ohlin-Samuelson model for the US producing 2 goods (digital cameras and…

A: Eli Heckscher and Bertil Ohlin created the Heckscher–Ohlin model (H–O model), which is a general…

Q: Country A has 10 million workers and Country B has 20 million workers. Each worker in Country A can…

A: Opportunity costs show the potential benefits that an individual, investor, or business misses out…

Question

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: State the given information

VIEW

Step 2: Choose and explain the correct answer

VIEW

Step 3: Get L1 and L2

VIEW

Solution

VIEW

Step by step

Solved in 4 steps with 12 images

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

Capital goods D Which of the following would cause an inward (left) shift of the PPC? B A A tax is decreased on business machinery - Consumer goods Favorable weather allows for a 50% yield increase in crops There are new technological advances in all industries The cost of inputs increases
QUESTION 4 A small open economy produces two goods, 1 and 2, at output levels y;, i = 1, 2. Output prices are set on world markets and denoted p1 , P2. The economy is endowed with quantities L of labour and K of capital. Capital is used in sector 2 only, and labour is used in both sectors, L; denoting the use of labour in sector i = 1, 2. The wage rate and the capital rental rate are w and r, respectively. The production function for good l is y1 = L1 , and good 2 has production function y2 = VKL. Consider the economy form Question 4. Suppose that there is another economy, which is identical to the first one but has a greater endowment of capital K' > K.what is the output of good 2 in either economy? Assuming that consumers in both countries are identical, what is the pattern of trade between those two countries? O a. The first country produces y2 = K and the second country produces y½ = K'. Therefore, the first country exports good 1 and а. 2p imports good 2. O b. The first country…
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.
Question 8 d e and f Please help solve 8 d e and f
part g please
Consider two countries Home and Foreign producing goods using only one factor of production, Labor. These are the marginal products of labor. Home has 100 people and foreign has 50 people. Home: Wheat 4 bushels Cloths 2 yards Foreign: Wheat 1 bushel Cloths 1 yard Assuming there is no trade, draw production possibility frontiers of two countries. With no trade, what are the relative prices of wheat and cloths in two countries? What will happen when they begin to trade?
Parts c and d please
Suppose that a country with a bowed-out PPF is operating efficiently. The country can produce either capital-intensive goods or labor-intensive goods. If the country DECREASES its production of labor-intensive goods, the opportunity cost of producing labor-intensive goods remains constant. cannot be determined from the given information. increases. decreases.
Assume that Sweden and Norway have the following set of production factors (see table below). Suppose further that for the production of one unit of steel it takes two machines and 8 workers and for one unit of bread it takes one machine and 8 workers. Sweden Norway Capital Labour 40 machines 10 machines 200 workers 60 workers a) Which commodity, bread or steel, is relatively capital-intensive and which is relatively labor-intensive? Show how to decide this. b) Which country will export bread and steel respectively? Why? Show how to determine this in a figure or with equations. c) Explain what happens to the return on capital and labor in Sweden and Norway after trade has begun between the countries.
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.
© Macmillan Learning Production, Economic Growth, and Trade. - End of Chapter Problem Ice cubes are an enjoyable product that many take for granted since they are easily produced in a freezer. But prior to the invention of refrigeration in the late 19th century, obtaining ice in warm climates required it to be imported from cold environments, making it an expensive luxury item. The new technology of refrigeration increased allocative efficiency neither production nor allocative efficiency production efficiency both production and allocative efficiency in the economy.
As you did for Freedonia, use the green line (triangle symbol) to plot the trading possibilities line (TPL) for Desonia. Then place the black point (plus symbol) on the trading possibilities line to indicate Desonia's consumption after specialization and trade. ? SUGAR (Millions of pounds) 32 28 24 20 16 N 00 4 0 PPF True 4 False 8 Desonia 20 12 16 GRAIN (Millions of pounds) 24 28 32 TPL True or False: Without engaging in international trade, Freedonia and Desonia would not have been able to consume at the after-trade consumption bundles. (Hint: Base your answer to this question on the answers you previously entered on this page.) + Consumption After Trade