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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.
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- Consider two competitive economies that have the same quantities of labor and capital (K=L), and the same technology. The economies of the countries are described by the following Cobb–Douglas production functions: North Economy: Y = AK^0.7 L^0.3 South Economy: Y = AK^0.3 L^0.7 If half of workers (L) in North immigrated to South, explain how would total output, marginal produc- tivity of labor, and labor’s share of income in the two economies change?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 labor's share of income larger? ExplainConsider two competitive economies that have the same quantities of labor and capital (K=L), and the same technology. The economies of the countries are described by the following Cobb–Douglas production func- tions: North Economy: Y = AK^0.7 L^0.3 South Economy: Y = AK^0.3 L^0.7 Compare the total production in these two countries and explain your answer. In which economy is the marginal product of labor larger? Explain your answer. In which economy is the labor’s share of income higher? Explain your answer. If half of workers (L) in North immigrated to South, explain how would total output, marginal produc- tivity of labor, and labor’s share of income in the two economies change?
- 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 marginal product of labor larger? Explain.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 Which economy has the larger total production? Explain.Consider an economy with two countries and two goods. Unit labor requirement for each product is given in the table below. Domestic Foreign Apple 1 4 Orange 2 1 Available Labor 1,000 7,000 Suppose that Domestic and Foreign can trade apple in exchange for orange at 1-to-1 ratio. Assume that consumers also prefer consuming at one apple for every orange. Calculate the increase in consumption of orange in Foreign after trade opens. Report your answer in 3-decimal precision. Ex: If your answer is 666.54634654674, then 666.546.
- "Accoring to Ricardo's analysis, a country exports any good whose production requires fewer labor hours per unit than the labor hours per unit needed to produce the good in the foreign country. That is, the country exports any good in which its labor producivity is higher than the labor productivity for this good in the foreign country." Do you agree or disagree? why?Consider an economy with two producers, Sidney and Connor. Each allocates 8 hours per day between the production of chocolate and bananas. Given 8 hours of labour, Sidney can produce 80kg of chocolate or 16kg of bananas. Connor can produce either 2kg of chocolate or 4kg of bananas per hour. B) Introducing Trade i) Suppose production capacity does not change. Do we expect there to be trade between Sidney and Connor? Why or why not? ii) What are the bounds on the price of bananas (in terms of chocolate) if there is trade? In other words, what range must the price of bananas fall within? iii) Assume a price of 4. In other words, 1kg of bananas cost 4kg of chocolate. Explain why trade is likely to make both Sidney and Connor better off in this case.There are two countries, NZ and AUS, which use the same technology for production of food and cloth. The labour (L) and capital (K) endowments are L = 100 and K = 60 for NZ, and L = 50 and K* 20 for AUS. The inputs used in production in NZ and in AUS are given in the following table: NZ AUS Labour Capital | Labour Capital Food aLF = 4 aKF = 3| aif = 6 akF = 2 Cloth a LC акс 5 aic = 8 akc = 4 %3D %3D (d) What is the level of free trade relative price of cloth compared to the two autarky relative prices of cloth? (e) Which country exports what? Relate the answer to the Heckscher- Ohlin Theorem. Illustrate the imports and exports. (f) Show using indifference curves that both countries gain from trade.
- There are two states: Apple State and Banana State. There are four homogeneous goods, one factor input (labor), and unit labor requirements are given in the following table. In addition, wage rate in Apple State is $2 and that in Banana State is $3. If two states agree to trade goods freely, which product(s) will Apple State produce? 0 0 0 0 Textile Fish Soybean Corn Units of labor required per unit of output Apple State Soybean Textile and Fish and Corn Fish, Soybean and Corn Corn 5 4 3 2 Banana State 2 2 4 4Suppose a bakery has 14 employees to be designated as bread bakers (B) and cake bakers (C), so that B +C= 14. Given the following production functions, y = 480.5 and x= c0.5 an equation for the production possibilities frontier is y= 4/14-x Given the following production functions, y = B and x= 5c°.5, an equation for the production possibilities frontier is y =Factor-price equalization The fictional country of Tomczakistan is a nation that is relatively rich in capital resources. It can produce two types of goods, capital-intensive goods and labor-intensive goods. Tomczakistan’s production possibilities frontier (PPF) is shown on the following graph. Currently, Tomczakistan is closed to international trade and producing at the grey point (star symbol) labeled A on the graph. Suppose that Tomczakistan is going to trade with Leightvania, a country that is relatively rich in labor and was also previously closed to international trade. On the following graph, use the green point (triangle symbol) to indicate which way Tomczakistan will adjust its production by placing it on one of the two black points (plus symbol). Dashed droplines will automatically extend to both axes.
