Japan Indonesia Capital 10 machines 30 machines Labor 20 workers 50 workers Suppose that Japan and Indonesia have the factor endowments in the preceding table. Suppose further that the production requirements for a laptop computer are 5 machines and 10 workers, and the requirements for a unit of cloth are 2 machines and 5 workers a. Which good, computer or cloth, is relatively capital-intensive? Labor-intensive? Explain your answer. b. Which country would export cloth? Why? Give arguments in favor of your answer.
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- France and Poland each have one worker whosemonthly linear Production PossibilityFrontier indicatesthe following production possibilities: PolandFranceComputers (C) 246Grain (G) 43 a) France’sopportunity cost of G in terms of units of C equals ______ ? b) Poland’sopportunity cost of G in terms of units of C equals ______ ?For the followingparts, please complete the questions by filling in the blank, and responding toremainderof the question: c) Poland’scomparative advantage is in ______ because: d) If France and Poland decide to trade, _________ will be theexporter of G while ______ will bethe importer because: e) If the economies choose to trade, the world relative priceof goods must be ________ in orderfor trade to be mutually beneficial, because: 4.In the following problem, assume that the UK currency is the pound sterling (PST)and thecurrency in the restof the Europe is the euro (EUR). Suppose that thePST appreciates relative to the EUR. For the following parts, you will…Show that, when using a traditional economic production function,doubling our population can double our output if capital stocks alsodouble. Use the production function: Q = AK L , where A representstechnology in an economy, K capital, and L labor. Double K and L andshow that Q also doubles, assuming α=β=1/2. Now show that, when we incorporate natural capital into thediscussion, doubling the population does not increase output in thesame way (since natural capital cannot also grow). Use theproduction function: Q = AK L N , where N is natural capital. DoubleK and L and show that Q less than doubles, assuming α=β=γ=1/3.15. Write short notes on; succession of WTO from GATT. Objectives of WTO Functions of WTO
- 4. The table below shows the total endowments of labour and capital in Germany andAustria, respectively.GermanyWorkers 100 Machines 20 Austria Workers 10Machines 4 Assess all the statements below and judge which of them is true and which is false.Provide a short justification for your assessment.According to the Heckscher-Ohlin model…a) …both countries are comparatively abundant in labour.b) …Austria is comparatively abundant in capital.c) …Germany exports should be in goods that use either labour or capital, depending on thegood.d) …Germany exports should be in goods that intensively use labour in production.e) …Austria will lose from trade, since it has both much less labour and capital endowment.Two countries, Korea and Vietnam, are engaging in international trade.They produce two goods: automobiles and cloth. We observe a relativeabundance of cheap labor in Vietnam and a relative abundance of capitalin South Korea. a. Assume that automobiles are capital-intensive and cloth are cheaplabor-intensive. Using the Hecksher-Ohlin theory, explain what willhappen in trade between these two countries, in terms of export andimport. c. Draw a graph that shows the above situation in South Korean economy with a P P F and two relative prices (one before trade and theother after trade). The quantity of automobiles (QAuto) is on thehorizontal axis and the quantity of cloth (QCloth) is on the verticalaxis.You just got a job in Washington, D.C. You moveinto an apartment with some acquaintances. All yourroommates, however, are slackers and do not clean upafter themselves. You, on the other hand, can clean fasterthan each of them. You determine that you are 70%faster at dishes and 10% faster with vacuuming. All ofthese tasks have to be done daily. Which jobs shouldyou assign to your roommates to get the most free timeoverall? Assume you have the same number of hours todevote to cleaning. Now, since you are faster, you seemto get done quicker than your roommate. What sortsof problems may this create? Can you imagine a traderelated analogy to this problem?
- scenario Production Advantage and Opportunity CostsAssume there are two countries, the United States and France, and two goods, automobiles andcomputers.The table presented below shows the number of automobiles and computers that the United States andFrance can produce with the same amount of resources.United States FranceAutomobiles 120 100Computers 60 55Source: Pearson Education Inc. 1.1 Which country has an absolute advantage in computer production? Motivate your answer.1.2 Which country has a comparative advantage in the production of automobiles? Motivateyour answer. 1.3 Assume these countries trade with one another under the conditions of free trade. Whichcountry will specialise in the production of automobiles? Motivate your answer. 1.4 If free trade exists between the United States and France, what are the highest and lowestlevels for the price of an automobile (expressed in terms of computers)? Motivate youranswer by stating which level favours the United States and France.Suppose that in a year an American worker canproduce 100 shirts or 20 computers and a Chineseworker can produce 100 shirts or 10 computers.a. For each country, graph the productionpossibilities frontier. Suppose that without tradethe workers in each country spend half their timeproducing each good. Identify this point in yourgraphs.b. If these countries were open to trade, whichcountry would export shirts? Give a specificnumerical example and show it on your graphs.Which country would benefit from trade?Explain.c. Explain at what price of computers (in terms ofshirts) the two countries might trade.d. Suppose that China catches up with Americanproductivity so that a Chinese worker canproduce 100 shirts or 20 computers in a year. Whatpattern of trade would you predict now? Howdoes this advance in Chinese productivity affectthe economic well-being of the two countries’citizens?cost data:Assembly: Total cost of production = 400Earnings of High-Skilled Labor = 100Earnings of Low-Skilled Labor = 200Earnings of Capital = 100R&D: Total cost of production = 400Earnings of High-Skilled Labor = 175Earnings of Low-Skilled Labor = 125Earnings of Capital = 100A) In which factor is assembly intensive? In which factor is R&D intensive? Suppose that due to the opening of trade, the price of assembly falls by −20%, the price of R&Dremains unchanged, 0%, and capital’s share earnings remains constant. What has happened to the relative wage of high-skilled/low-skilled labor? Does this match the predictions of the offshoring model?
- suppose you ar etrying to determine the aftereffects of hurricane Katrina on the economy of Louisiana. Which assumptions could be made to simplify the study? Note that not all statements may be placed. 1. consider the effects on all of Louisiana's interstate trade partnters 2. focus on just the crawfish-and catfish-farming industries in Louisiana 3. determin the effects while holding the infrastructure and factors of production constant 4. track the total net worth of the output produced by the state prior to the hurrican and after the hurricane 5. compare the change in prices for all goods1. Suppose that the United States and Canada have the factor endowments given in Table 1 below. Table 1 ..................United States......... Canada Capital..... 80 machines ...........40 machines Labour..... 40 workers ..............80 workers a) According to the above table, which country is relatively more labor-abundant? Which country is relatively more capital-abundant? Explain your answer with working calculations and a relevant diagram. (factor abundance diagram for the countries) b) Suppose further that the production requirements for a unit of steel is 4 machines and 2 workers, and the requirement for a unit of bread is 2 machines and 4 workers. Which good, bread or steel, is relatively capital-intensive, and which good is labor-intensive? Explain your answer with a relevant diagram. (factor intensity diagram for both commodities) c) Which country would export steel? Why? Explain which trade theory that predicts such a pattern of trade.The Marope Economy has the capacity to produce the goods and services that are outlined in Table 1 below. You are required to:a. Draw a Production Possibility Frontier (PPF) and list all efficient points of production.b. Marope Economy wishes to produce 520 billion units of consumer goods. Plot this output onthe Frontier and state whether this is an efficient point or not.Table 1 – Production Possibilities Output (billions of units per year) Consumer goods Consumer servicesPart BA B480 420 0 120C D240 0 240 300 Use graphs to demonstrate how the following factors will change the PPF.a. A decrease in migrationb. An increase in natural resourcesc. Changes in technology