Two economies have endowments (K,L) = (100,200) and (K*,L*) = (110,190). With the technology in problem 7, predict the pattern of trade. Explain which country is labor abundant and labor cheap.
Two economies have endowments (K,L) = (100,200) and (K*,L*) = (110,190). With the technology in problem 7, predict the pattern of trade. Explain which country is labor abundant and labor cheap.
Problem 7
Draw the production diagram of the economy with the service sector in problem 4 and the manufacturing sector in problem 6.
Problem 4
Sketch the cost minimization that occurs with w = $2, r = $3, c - $1, and 0.2 unit of L input. Find the unit input of capital and sketch the unit value isoquant. Describe what happens in this cost minimization if r falls to $2.
Problem 6
Given factor prices w - $2 and r = $3, suppose 0.35 units of labor are used in manufacturing to produce $1 of output. Sketch the
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