Answered: wo countries, Korea and Vietnam, are…

Principles of Economics 2e

2nd Edition

ISBN:9781947172364

Author:Steven A. Greenlaw; David Shapiro

Publisher:Steven A. Greenlaw; David Shapiro

Chapter34: Globalization And Protectionism

Section: Chapter Questions

Problem 55P: Assume two countries, Thailand (T) and Japan (J), have one good: cameras. The demand (d) and supply...

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Two countries, Korea and Vietnam, are engaging in international trade.
They produce two goods: automobiles and cloth. We observe a relative
abundance of cheap labor in Vietnam and a relative abundance of capital
in South Korea.

a. Assume that automobiles are capital-intensive and cloth are cheaplabor-intensive. Using the Hecksher-Ohlin theory, explain what will
happen in trade between these two countries, in terms of export and
import.

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 the
other after trade). The quantity of automobiles (QAuto) is on the
horizontal axis and the quantity of cloth (QCloth) is on the vertical
axis.

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