Question 1 Using a production possibilities frontier (PPF) diagram, determine how does a country’s PPF change in response to the events described below. Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing. a) Reducing import taxes (tariffs) on primary inputs b) Increasing the expenditure on research and development c) The introduction of greater flexibility in labour markets (new government laws enabling easier hiring of workers) d) Increasing skilled migration into a country e) The discovery of new mineral deposits in a country
Question 1
Using a production possibilities frontier (
Make sure to explicitly indicate what sectors you are representing, and what sort of assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter follows from your assumptions on the factor intensity of the sector you are representing.
a) Reducing import taxes (tariffs) on primary inputs
b) Increasing the expenditure on research and development
c) The introduction of greater flexibility in labour markets (new government laws enabling easier hiring of workers)
d) Increasing skilled migration into a country
e) The discovery of new mineral deposits in a country
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Using a production possibilities frontier (
in response to the events describe below.
Make sure to explicitly indicate what sectors you are representing, and what sort of
assumptions each event implies (i.e., a neutral effect vs a sector-biased effect). The latter
follows from your assumptions on the factor intensity of the sector you are representing.
a) A relaxation of policies allowing more foreign direct investment into the country.
b) Increasing the minimum wage level.
c) A decrease in expenditure on research and development.
d) An increase in the retirement age.
e) Government policies supporting the provision of services, without affecting
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