There are two goods, Computers and Wheat, and two factors of production, capital and labor. Production in both sectors satisfies constant returns to scale. Production of computers is relatively more capital-intensive. Both input and final goods markets are competitive. Goods are freely traded internationally, but factors are immobile across countries. We will focus our analysis on the Home country. In the initial equilibrium, the Home country produces both computers and wheat, but only exports wheat. In our analysis, we will consider the following sequence of time-frames: . In the short run, both factors are completely specific to their initial sectors of employ- ment. (i.c. both factors are used to produce both goods, but in the short run it is impossible to relocate the factors that are currently in use for production)

There are two goods, Computers and Wheat, and two factors of production, capital and labor. Production in both sectors satisfies constant returns to scale. Production of computers is relatively more capital-intensive. Both input and final goods markets are competitive. Goods are freely traded internationally, but factors are immobile across countries. We will focus our analysis on the Home country. In the initial equilibrium, the Home country produces both computers and wheat, but only exports wheat. In our analysis, we will consider the following sequence of time-frames: . In the short run, both factors are completely specific to their initial sectors of employ- ment. (i.c. both factors are used to produce both goods, but in the short run it is impossible to relocate the factors that are currently in use for production)

ENGR.ECONOMIC ANALYSIS

14th Edition

ISBN:9780190931919

Author:NEWNAN

Publisher:NEWNAN

Chapter1: Making Economics Decisions

Section: Chapter Questions

Problem 1QTC

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