Suppose two countries, A and B, trade two goods, Good 1 and Good 2. Production of both goods requires capital (K) and labor (L) and production of one unit of Good 1 requires more capital relative to labor than production of one unit of Good 2. We also know that KA Ka, where upper bars denote the total amount of a factor in a country. LA LB i. State the Heckscher-Ohlin theorem. What does it predict about trade patterns between countries A and B once they open up for trade? ii. Using a production possibility frontier and an indifference curve, draw a diagram that shows no-trade and free-trade equilibrium in country A.

Suppose two countries, A and B, trade two goods, Good 1 and Good 2. Production of both goods requires capital (K) and labor (L) and production of one unit of Good 1 requires more capital relative to labor than production of one unit of Good 2. We also know that KA Ka, where upper bars denote the total amount of a factor in a country. LA LB i. State the Heckscher-Ohlin theorem. What does it predict about trade patterns between countries A and B once they open up for trade? ii. Using a production possibility frontier and an indifference curve, draw a diagram that shows no-trade and free-trade equilibrium in country A.

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

See similar textbooks

Similar questions

Suppose that France and Italy both produce wine and cheese. France's opportunity cost of producing a case of cheese is 5 barrels of wine, while Italy's opportunity cost of producing a case of cheese is 10 barrels of wine. By comparing the opportunity cost of producing cheese in the two countries, you can tell that comparative advantage in the production of cheese and has a comparative advantage in the production of wine. Suppose that France and Italy consider trading cheese and wine. France can gain from specialization and trade as long as it receives more than of wine for each case of cheese it exports to Italy. Similarly, Italy can gain from trade as long as it receives of cheese for each barrel of wine it exports to France. more than Based on your answer to the last question, a price ratio between benefit both countries. has a barrels of wine per case of cheese will
What is the trade balance between the U.S. and China from 2018 to 2020?Graph the year and trade balance (exports – imports) using year for horizontal axis and trade balance for vertical axis. What is the difference between absolute advantage and comparative advantage? Which among these 2 concepts is the basis of trade? Suppose that an American worker can produce 1000 shirts or 200 computers, while a Chinese worker can produce 1000 shirts or 100 computers.In the US, what is the opportunity cost of producing an additional shirt (measured in terms of foregone computers)?
I don't understand the second part of this homework. If Frankie and Johnny completely specialize according to comparative advantage, what will happen to the amount of eggs and milk? I have the opportunity cost calculated to understand who should do what in this case. But what will I do to that number?
Consider two neighboring island countries called Bellissima and Dolorium. They each have 4 million labor hours available per week that they can use to produce rye, jeans, or a combination of both. The following table shows the amount of rye or jeans that can be produced using 1 hour of labor. Rye Jeans Country (Bushels per hour of labor) (Pairs per hour of labor) Bellissima 12 24 Dolorium 8 32 Initially, suppose Bellissima uses 1 million hours of labor per week to produce rye and 3 million hours per week to produce jeans, while Dolorium uses 3 million hours of labor per week to produce rye and 1 million hours per week to produce jeans. Consequently, Bellissima produces 12 million bushels of rye and 72 million pairs of jeans, and Dolorium produces 24 million bushels of rye and 32 million pairs of jeans. Assume there are no other countries willing to trade goods, so, in the absence trade between these two countries, each country consumes the amount of rye and jeans it produces. v of…
2. Answer letter c and D.
Please help, it's just one question.
1-Analyze the following (2x2) matrices. Identify the countries having certain advantages. Moreover, specify the benefits of trade for both countries. A (2x2) matrix involves (2 countries exchanging 2 commodities or products) Matrix A Wheat (bushels/labor Cloth (yards/labor hour) hour) United States U.K. 3. (Numerical values reflect output per unit of input) a. Will trade occur??? Identify the country having the absolute advantage in wheat and the one having the absolute advantage in cloth. b. Identify the production possibility frontiers for both countries. c. Show me the gains of trade if we assume that the U.S. exchanges 6 units of wheat for 6 units of cloth.
has an absolute advantage in the production of barley, and has an absolute advantage in the production of alfalfa. bushels of barley, whereas Megan's opportunity cost of producing 1 bushel of opportunity cost of producing alfalfa than Megan, has a has a comparative advantage in the production of barley. Larry's opportunity cost of producing 1 bushel of alfalfa is alfalfa is bushels of barley. Because Larry has a comparative advantage in the production of alfalfa, and
Now suppose that if Zimbabwe uses all of its resources, it can produce 50,000 tons of metal ores or 100,000 delivery trucks (trading off at a constant rate). Suppose that if South Africa uses all of its resources, it can produce 20,000 tons of metal ores or 80,000 delivery trucks (trading off at a constant rate). What is the direction of trade (who exports what to whom)? Be sure to give the opportunity costs of production of both goods for both countries. What is one potential price of metal ores in terms of trucks at which both Zimbabwe and South Africa would benefit from trade? Rank the autarkic prices and the world price of metal ores from lowest to highest.
3. It has been argued that the Heckscher-Ohlin model defines comparative advantage as the outcome of variances in countries':a. Degree of technological sophisticationb. Relative richness of resourcesc. Labor costsd. Important production activities