International trade 1. Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. a. How much of each good would Ecuador produce in free trade if complete specialization occurred?

International trade 1. Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. a. How much of each good would Ecuador produce in free trade if complete specialization occurred?

Survey Of Economics

10th Edition

ISBN:9781337111522

Author:Tucker, Irvin B.

Publisher:Tucker, Irvin B.

Chapter21: International Trade And Finance

Section: Chapter Questions

Problem 10SQ

See similar textbooks

Similar questions

You just overheard your friend say the following: Poor countries like Malawi have no absolute advantages. They have poor soil, low investments in formal education and hence low-skill workers, no capital, and no natural resources to speak of. Because they have no advantage, they cannot benefit from trade. How would you respond?
If trade increases world GDP by 1 per year, what is the global impact of this increase over 10 years? How does this increase compare to the annual GDP of a country like Sri Lanka? Discuss. Hint To answer this question, here are steps you may want to consider. Go to the World Development Indicators (online) published by the World Bank. Find the current level of World GDP in constant international dollars. Also, find the GDP of Sri Lanka in constant international dollars. Once you have these two numbers, compute the amount the additional increase in global incomes due to trade and compare that number to Sri Lankas GDP.
Occasionally, a government official will argue that a country should strive for both a trade surplus and a healthy inflow of capital from abroad. Explain why such a statement is economically impossible.
Economists sometimes say that protectionism is the second-best choice for dealing with any particular problem. What they mean is that there is often a policy choice that is more direct or effective for dealing with the problemâ€”a choice that would still allow the benefits of trade to occur. Explain why protectionism is a second-best choice for helping workers as a group helping industries stay strong protecting the environment advancing national defense
c. Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. D. What would the pattern of trade be in free trade? Why? E. How much of each good would Ecuador produce in free trade if complete specialization occurred? F. Specify a plausible free trade terms of trade.
International trade Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. A. Which country has the absolute advantage in bananas? Why?
international trade Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. a. What would the pattern of trade be in free trade? Why?
international trade Consider a Ricardian model with two countries, the US and Ecuador, producing two goods, bananas and machines. Suppose the unit-labor requirements are: aLBUS= 8, aLBE = 4, aLMUS = 2, aLME = 4. Let the US have 3200 workers and Ecuador have 400 workers. a. What is the autarky terms of trade in the US?
Consider the Heckscher-Ohlin model of international trade. There are two goods, shoes and computers, produced with labour and capital. The production process features diminishing returns to each factor of production. The production of shoes is labour-intensive and the production of computers is capital-intensive. There are two countries, the UK and India. Denote the labour force and the capital stock of the UK and India by LUK and KUK, and LIN and KIN , respectively. The UK is capital-abundant and India is labour abundant. Describe India’s factor markets: on a graph with the labour-capital ratio (L/K) on the horizontal axis and the wage-rental ratio (W/R) on the vertical axis, depict India’s no-trade economy-wide relative demand (RD) and relative supply (RS) of labour-to-capital. Show the no-trade equilibrium wage-rental ratio.
Give 5 examples of ways in which globalization through trade has promoted interdependence among countries
In Lucas paradox, that if trade in capital good is free and competitive, new investment will occur only in the poorer economy, and this will continue to be true until capital-labor ratios, and hence wages and capital returns, are equalized. Within the set-up of Lucas' statement – output produced by capital and labor with constant returns to scale and the same technology being accessible to all countries – how can models of international trade explain why capital flows do not occur the way Lucas argues they should?
QUESTION 1.Consider a standard Heckscher-Ohlin model with two countries: Germany is capital-abundant; Malaysia is labour-abundant. Each country uses labour and capital to produce two goods: Good 1 is labour-intensive and Good 2 iscapital-intensive. Under free trade, the world relative price of Good 2 will be: (a) Lower than the relative price of Good 2 under autarky in Malaysia.(b) Lower than the relative price of Good 2 under autarky in Germany.(c) Lower than the autarky relative price of Good 2 in both countries.(d) Higher than the autarky relative price of Good 2 in both countries. Explain why.