PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
7th Edition
ISBN: 9781260110920
Author: Frank
Publisher: MCG
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Chapter 7, Problem 7.3CC
To determine
Determine why the boss gives the single available candy-wrapping machine to Person L rather than Person E.
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Consider a specific-factors model where two Countries, Denmark and Tanzania, use labor to produce cake (C) and helicopters (H). However, arable land (A) are a factor specific to cake, and jerrycans (J) are a factor specific to helicopters. Suppose that Tanzania has L = 100 workers, J = 40 jerrycans, and A = 1000 arable land. The production functions and marginal products of labor for cake and helicopters are:
C = 4 x Lc0.5 x A0.5
MPLc = 2 x Lc-0.5 x A0.5
H = 4 x LH0.5 x J0.5
MPLH = 2 x LH-0.5 x J0.5
In Tanzania, the price of crystals is 20 and the price of hyperdrives is 200. In this case, the wage rate will be ________ and ________ workers will be employed in the cake industry and __________ workers will be employed in the helicopter industry.
According to comparative advantage, trade between two countries
Group of answer choices
will benefit all the industries in each of the countries.
guarantees that consumption levels will be equal in the two countries.
maximizes the amount of inputs that are used in the production of all products.
allows each of the trading countries to allocate its resources most efficiently.
Comparative advantage does not address
Question 10 options:
whether specialization and trade benefit more than one party to a trade.
whether absolute advantage or comparative advantage that really matters.
how are the gains from trade shared among the parties to a trade.
whether it possible for specialization and trade to increase total output of traded goods.
Chapter 7 Solutions
PRINCIPLES OF MACROECONOMICS(LOOSELEAF)
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