1. b) Explain why factor prices are equalised, both in relative and absolute terms, according to Heckscher-Ohlin-Samuelson. What assumptions are especially needed to ensure this result?
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1. b) Explain why factor prices are equalised, both in relative and absolute terms, according to Heckscher-Ohlin-Samuelson. What assumptions are especially needed to ensure this result?
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- Explain in detail factor price equalisation. Discuss reasons why the factor price equalisationproposition may be unlikely to hold when we compare factor prices across economies.In the context of the Heckscher-Ohlin model with the two production factors capital andlabor, we have discussed that industries differ in their labor and capital-intensities.(a) Define labor and capital-intensity of an industry.(b) Explain what we mean when we assume that there are no factor intensity reversals.Illustrate the case of a factor intensity reversal using a suitable diagram.(c) Human activity, particularly the production and consumption of energy-intensive goods and the associated emissions of carbon dioxide into the atmosphere, is a major factor driving global warming. Therefore, the European Union will introduce a carbon border adjustment mechanism (CBAM) in the near future. Imagine a variant of the Heckscher-Ohlin model with two production factors labor and energy used in two industries. Define labor and energy intensity of industry in such a model. Can you think of examples of an energy-intensive industry versus a labor-intensive industry?Please answer each question with sufficient detail. Relevant detailed responses are highly rewarded. If you consult any sources, then you should provide both in-text citations and references at the end of each response. You need to make sure at least consult your textbook for your responses. 1. Explain how the international movement of products and of factor inputs promotes an equalization of the factor prices among nations.
- Factor Price Equalization means that A. the demand for the factor that is abundant in a country will be higher so that the price of this factor equals across countries B. for countries to trade freely, factors of production need to be taxed accordingly so that their prices are equal across countries C. the supply of the factor that is abundant in a country will be higher so that the price of this factor equals across countries D. free trade makes the cost of identical factors in different countries to be more similar than they were in autarky This question has more than one ( 1 ) answersExplain the similarities and differences between the assumptions of Specific Factor Theory and the Model Trading Heckscher – OhlinConfirm that the Cobb-Douglas production function satisfies all the three properties: more is better, concavity, and CRS.
- Do you agree that capital is topmost factor under the category of resources? Why? Please explain and justify your answers. When it comes to knowledge on customers' needs and expectations, does the three variables such as observations, interviews, and market research are really factors in product development? Why? Kindly elaborate your answers per variable.“Factor prices determine factor proportions used in production of goods in the H-O model.”Explain with the help of a graph.In the healthcare economy, as in many other markets, if the firm has a high capital-to-labor ratio, it is more responsive to changes in price due to the inability to easily switch production capacity because of the fixed nature of capital or the substitutability of labor for capital. Group of answer choices True False
- In the specific factor model in a market equilibrium the mobile factor's productivity must be the same for the production of all goods. True FalseWith the help of a well-illustrated diagrams, show and clearly explain: How a firm maximizes profits given cost constraints i.e Max X= f(L,K), Subject to Ĉ=wL+rK How a firm minimizes costs given a certain level of output i.e Minimize C = wL+rK Subject to Ẍ = f(L,K) How relative factor prices and factor productivity determine optimal input combination. Show clearly how the maximizing output and optimal inputs combinations are achieved in the two cases.After listing all the necessary traits of this production function, Y=K^5/8 (NA)^3/8, provide themathematical condition of the SS and then derive the specific mathematical expressions for the SS capital stock pereffective worker (K/NA) and the SS output per effective worker (Y/NA).