s. Assume that only two countries, Colombia and Bulgaria, exist.Consider the following dataCountriesFactor Endowments Colombia BulgariaLabor Force50,000 6,800Capital Stock9,0002,500If good S is capital intensive and good T is labor intensive, usethe Heckscher-Ohlin model to find out the trade patternbetween Colombia and Bulgaria.

Heckscher-Ohlin model:- This is an economic model which suggest that countries should export those…

Answered: s. Assume that only two countries,…

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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Assume a Ricardian model. The following table shows the amount of output produced by each unit of labor in Germany and France and also the amount of labor available in those countries. Wheat (W) Computers (C) France 5 8 Germany 2 4 (a) Under free trade each country completely specializes in the good in which it has comparative advantage. Germany has 90,000 units of labor. Germany consumes 105,000 tons of wheat whether it is in autarky (no trade) or in free trade. Suppose under free trade the terms of trade are 1W = 1.75C. How many computers does Germany gain when its economy moves from autarky to free trade? Fermany produces Comparative wheat 525d = 0) once advantage. trade
From the trade model, we found that in most cases, trade creates value. Where do we see that conclusion in the Supply and Demand model? You should be able to answer this in a few sentences.
The Power of Trade and Comparative Advantage: End of Chapter Problem “Opportunity cost” is one of the tougher ideas in economics. Let’s make it easier by starting with some simple examples. In the following examples, find the opportunity cost: Your answer should be a rate, as in “1.5 widgets per year” or “6 lectures per month.” Assume that these relationships are simple linear ones, so that if you put in twice the time you get twice the output, and half the time yields half the output. a. Erin has a choice between two activities: She can repair one transmission per hour or she can repair two fuel injectors per hour. What is the opportunity cost of repairing one transmission? b. Katie works at a customer service center and every hour she has a choice between two activities: answering 200 telephone calls per hour or responding to 400 emails per hour. What is the opportunity cost of responding to 400 phone calls? c. Deirdre has a choice between writing one more book this year or five…
Assume that Trinbago is a small country that produces wine and motor vehicles, where motorvehicles are capital intensive. Trinbago is also capital intensive, and the standard Heckscher -Ohlin(H-O) assumptions hold. The other country in the model is Vincyland.Could you assist with 2 graphs illustrating 1. The Hecksher Ohlin model based on the above this should show what the theory of comparative advantage stipulates 2. What trade pattern would occur if the Leontief Paradox holds how will this look graphically.
The table below shows the production of oil and lumber of ONE worker in China and India: rice (in pounds) shirts (unit) CHINA 400 200 INDIA 330 110 a) BEFORE trade (or with no trade), each country has 100 workers, and they allocate the worker for the production of the goods in the following way: China allocates 35 workers in the production of rice, and 65 workers in the production of shirts; India allocates 50 workers in the production of rice and 50 workers in the production of shirts. Find the maximum production and consumption of both goods for each country! b) If the countries decide to engage in trade (WITH TRADE), they will specialize in the production of the good in which they have comparative advantage. In which good should China specialize? How about India? JUSTIFY! (To answer this question you must calculate the opportunity cost of each good for both countries and then find the country's comparative advantage). What is the WITH TRADE production of the countries? c) If the…
If two parties trade based on comparative advantage and both gain, in what range must the price of the trade lie? Give an example
In the Heckscher-Ohlin model with trade the wage in a country that produces both goods will depend on its labour abundance. True False
Consider a two country, two goods, single factor model with Öxed labor requirements. If a country A has an absolute advantage in both goods over country B, there cannot be a international trade between them. 1. true 2. false
QUESTION 3 In the Heckscher-Ohlin model with trade the wage in a country that produces both goods will depend on its labour abundance. True False
Consider the specific factors model. There are two countries (Home and Foreign), two industries (Manufacturing and Agriculture) and three factors (labour, land, and capital.) Assume that home has comparative advantage in agriculture. Using a figure, show the impact of trade on earnings of labour, capital and land. Who will be in favour of trade and who will be against it?
In the Heckscher-Ohlin model, suppose the two factors of production are: high-skilled labor (H) and regular labor (L). The two sectors are manufacturing and business services. Manufacturing uses regular labor more intensively, and business services uses high-skilled labor more intensively. The two countries are the U.S. and China, and the U.S. has a comparative advantage in business services. a. Illustrate the effect of opening up to trade on the U.S. with the PPF and indifference curve diagram. Make sure you clearly label everything. What happens to the relative price of business services in the U.S.? Show clearly the gains from trade. b. What happens to the relative wage of high-skilled labor? Does inequality (the skill premium) increase? Show all work and explain. 2. Evidence for or against Heckscher-Ohlin model Leontieff Paradox i. Briefly describe the paradoxii.We discussed several explanations for the paradoxical result in class. Briefly describe two explanations. Inequality…
Two countries (A and B) produce tea and oranges using labor. The number of hours of labor required to produce these goods are given as follows: Country Тea Oranges A 6 20 В 8 30 If both countries have 1500 hours of labor available, explain how they can gain from trade.

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