QUESTION 1. Over dinner, your friend mentions an article about a population explosion in Malaysia and claims that this will dramatically alter production patterns in Malaysia. Suppose that at current factor prices Malaysian cloth is produced using 20 hours of labor for each acre of land and Malaysian food is produced using only 5 hours of labor per acre of land. 1. Suppose that the economy's total resources are 600 hours of labor and 60 acres of land. Use a box diagram to determine the allocation of resources. 2. Now suppose that the labor supply increases first to 1000 and then to 1200 hours. Using a box diagram as in the lecture, trace out the changing allocation of resources. Is the logic behind your friend's claim sound, according to the Heckscher-Ohlin model? 3. Your friend then ponders what would happen if the labor supply were to increase even further and asks what you think. So, what would the Heckscher-Ohlin model suggest would happen?

QUESTION 1. Over dinner, your friend mentions an article about a population explosion in Malaysia and claims that this will dramatically alter production patterns in Malaysia. Suppose that at current factor prices Malaysian cloth is produced using 20 hours of labor for each acre of land and Malaysian food is produced using only 5 hours of labor per acre of land. 1. Suppose that the economy's total resources are 600 hours of labor and 60 acres of land. Use a box diagram to determine the allocation of resources. 2. Now suppose that the labor supply increases first to 1000 and then to 1200 hours. Using a box diagram as in the lecture, trace out the changing allocation of resources. Is the logic behind your friend's claim sound, according to the Heckscher-Ohlin model? 3. Your friend then ponders what would happen if the labor supply were to increase even further and asks what you think. So, what would the Heckscher-Ohlin model suggest would happen?

Essentials of Economics (MindTap Course List)

8th Edition

ISBN:9781337091992

Author:N. Gregory Mankiw

Publisher:N. Gregory Mankiw

Chapter2: Thinking Like An Economist

Section: Chapter Questions

Problem 2CQQ

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