Microeconomics
11th Edition
ISBN: 9781260507140
Author: David C. Colander
Publisher: McGraw Hill Education
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Question
Chapter 9, Problem 2IP
To determine
Does the law of one price implies the equality between the wages of the US and China, if free trade is allowed.
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Chapter 9 Solutions
Microeconomics
Ch. 9.1 - Prob. 1QCh. 9.1 - Prob. 2QCh. 9.1 - Prob. 3QCh. 9.1 - Prob. 4QCh. 9.1 - Prob. 5QCh. 9.1 - Prob. 6QCh. 9.1 - Prob. 7QCh. 9.1 - Prob. 8QCh. 9.1 - Prob. 9QCh. 9.1 - Prob. 10Q
Ch. 9 - Prob. 1QECh. 9 - Prob. 2QECh. 9 - Prob. 3QECh. 9 - Prob. 4QECh. 9 - Prob. 5QECh. 9 - Prob. 6QECh. 9 - Prob. 7QECh. 9 - Prob. 8QECh. 9 - Prob. 9QECh. 9 - Prob. 10QECh. 9 - Prob. 11QECh. 9 - Prob. 12QECh. 9 - Prob. 13QECh. 9 - Prob. 14QECh. 9 - Prob. 15QECh. 9 - Prob. 16QECh. 9 - Prob. 17QECh. 9 - Prob. 18QECh. 9 - Prob. 19QECh. 9 - Prob. 1QAPCh. 9 - Prob. 2QAPCh. 9 - Prob. 3QAPCh. 9 - Prob. 4QAPCh. 9 - Prob. 5QAPCh. 9 - Prob. 1IPCh. 9 - Prob. 2IPCh. 9 - Prob. 3IPCh. 9 - Prob. 4IPCh. 9 - Prob. 5IP
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- Shoes are labor-intensive and satellites are capital-intensive to produce. The United States has abundant capital. China has abundant labor. According to the Heckscher–Ohlin model, which good will China export? Which good will the United States export? In the United States, what will happen to the price of labor (the wage) and to the price of capital?arrow_forwardHere is what Sweden and Canada can produce: Country Tons of Food Tons of Metal Sweden 40,000 XXXXX Canada XXXXX 1,000 Sweden has a comparative advantage in metal The price of metal will be between 10 and 20 food, if these countries trade. How much metal can Sweden produce? If you think the answer is 17,000, then write 17000, not 17,000.arrow_forwardLeontief’s paradox is an example of testing a trade model using actual data observations. If Leontief had observed that the amount of labor needed per $1 million of U.S. exports was 392 person-years instead of 182, would he have reached the same conclusion? Explain.arrow_forward
- Since many companies cut jobs or outsource overseas when they cannot compete with foreign companies, does that mean free trade is a bad idea and does not serve our interests?arrow_forwardAccording to the foreign trade effect, when the price of American-made cars falls, U.S. consumers are likely to buy: More American-made cars. More foreign-made cars. Fewer total cars. More foreign-made carsarrow_forwardThe book states “The pain caused by the movement toward a free trade regime is a short-term phenomenon, while the gains from trade once the transition has been made are both significant and enduring”. Unions in developed nations often oppose imports from low-wage countries because of the negative impacts that occur to the workers. I personally do not believe that such competition is unfair. The union’s argument is in the best interest of the people they represent, and not the country as a whole. If imports are stopped from low-waged countries, it would force developed countries to use and produce local goods and jobs. With more jobs and the use of more local goods, this gives an advantage to the union workers, but leaves our country at a disadvantage. Some disadvantages include the price of goods increasing, other countries not wanting to work with us, we will lose out on products that we can’t make, and it’s ultimately not in the best interest for economic growth in the long run.…arrow_forward
- According to the Heckscher-Ohlin model, free trade would lead to an equalization of wage rate internationally. Explain why we do not observe that result in the real world, where, for instance, there is great discrepancy in wage rate between developed and developing countriesarrow_forwardTrue or false? Free trade causes job losses in industries in which a country does not have a comparative advantage, but it also causes job gains in industries in which the country has a comparative advantage.arrow_forwardCountry A is increasing tariffs on steel imports to protect country A's local steel industries. How can such a trade policy be NOT good for country A?arrow_forward
- Give a viable trade agreement for these two countries, which shows that both countries are better off with this trade agreement. How much silver will Australia end up consuming and how many diamonds will it end up consuming? How much silver will Canada end up consuming and how many diamonds will it end up consuming? Show this consumption point for each country on its graph. Label the free trade consumption point with the point c.arrow_forwardWill cheap foreign wages alone make production in a foreign country (with the low wages) profitable? Please give an explanation.arrow_forwardWhich of the following is TRUE regarding trade and wages? Countries with low productivity levels will always have lower wages than high-productivity nations whether they trade or not. Trade can increase wages by increasing the productivity of labor. Trade directly increases productivity, which in turn increases wages. Trade helps to equalize wages between high- and low-productivity countries.arrow_forward
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