Use the specific factor model to analyze a simplified version of a liberalization of trade between Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume that there are three production factors: land, capital and labor. Land is specific to coffee, capital is specific to cars and workers can work in both industries. a) Describe using a graph how workers allocate in autarky between the two sectors in Brazil. Explain your answer.
Use the specific factor model to analyze a simplified version of a liberalization of trade between Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume that there are three production factors: land, capital and labor. Land is specific to coffee, capital is specific to cars and workers can work in both industries. a) Describe using a graph how workers allocate in autarky between the two sectors in Brazil. Explain your answer.
Chapter21: International Trade And Finance
Section: Chapter Questions
Problem 16SQ
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Use the specific factor model to analyze a simplified version of a liberalization of trade between Brazil and Japan. Assume that there are two goods that people want to buy: coffee and cars. Assume that there are three production factors: land, capital and labor. Land is specific to coffee, capital is specific to cars and workers can work in both industries. a) Describe using a graph how workers allocate in autarky between the two sectors in Brazil. Explain your answer.
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Assume that, under autarky, coffee is cheaper in Brazil than in Japan. How does the price of coffee
in Brazil change when Brazil opens up to international trade? Explain your answer.
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