QUESTION7 Consider the specific factors model that we discussed in the class. There are two countries (Home and Foreign), two industries (Manufacturing and Agriculture) and three factors (labor, land and capital). Assume that Home has comparative advantage in Agriculture. Using a figure, show the impact of trade on earnings of labor, capital and land. Who will be in favor of trade and who will be against it? Attach File Browse Local Files Browse Content Collection
QUESTION7 Consider the specific factors model that we discussed in the class. There are two countries (Home and Foreign), two industries (Manufacturing and Agriculture) and three factors (labor, land and capital). Assume that Home has comparative advantage in Agriculture. Using a figure, show the impact of trade on earnings of labor, capital and land. Who will be in favor of trade and who will be against it? Attach File Browse Local Files Browse Content Collection
Chapter1: Making Economics Decisions
Section: Chapter Questions
Problem 1QTC
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I have been struggling with number 7 and cannot find a solution to it, please help me out and explain.
Thank you!

Transcribed Image Text:Two countries (Home and Foreign) use labor to produce two goods: Cloth and Wheat. The number of units of the good that can be produced by one unit of labor are given below. The number of units of labor in the
Home and Foreign countries are 10 and 30, respectively.
(a) Calculate the opportunity costs of Cloth in the two countries, briefly describing your calculation. What are the goods in which the countries have comparative advantage?
(b) Use appropriate examples for world price and indifference curves to show that both Home and Foreign benefit from trade. Mention the world price, and the points where production and consumption occur in the
two countries after trade.
Wheat
12
Cloth
Home
Foreign
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QUESTION 7
Consider the specific factors model that we discussed in the class. There are two countries (Home and Foreign), two industries (Manufacturing and Agriculture) and three factors (labor, land and capital). Assume that Home has comparative advantage in
Agriculture. Using a figure, show the impact of trade on eamings of labor, capital and land. Who will be in favor of trade and who will be against it?
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Browse Content Collection
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